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Because of the rapid rise in digital use, fraudsters can rapidly find new ways to steal money, taking advantage of customers’ lack of experience with digital platforms and many businesses’ resource constraints. The Federal Trade Commission estimated that between January 2020 and early January 2021, consumers filed over 275,000 complaints, leading to more than $210 million in losses related to COVID-19. As a result, companies must predict new fraud strategies to avoid damages and protect consumers from issues such as identity theft through new technologies such as biometric security.
Few could have expected the issues of 2020. As lockdown measures restricted conventional modes of business, the COVID-19 pandemic ushered in a time of rampant digitization to allow remote processes and ensure business continuity. This change exacerbated trends that were already in motion to a large extent. Much remains elusive when we look forward to 2021 and the post-COVID market world. Here are some prominent security, technology, and industry-related issues that are expected for the coming year. Understanding these could help people who work in financial institutions and banks better prepare for cybersecurity threats and concerns in 2021.
There are five fraud risks that companies should be aware of this year to help them prepare for fraudulent activity in 2021.
1. Biometric identity fraud
With biometric technology, many effective software and mobile applications across a variety of industries can be found. Unfortunately, such budding technological advancements are not excluded when it comes to threats from cybercrime. Fraudsters are now likely to utilize AI to break through traditional security solutions such as passwords, captcha features and even biometric authentication measures. There’s even the possibility of the use of deepfake technology to bypass authentication to gain access to systems and personal information. Another example of rising fraud trends is the use of social media filters – those which can imitate or swap facial features to another person’s likeness. These facial expression recreation algorithms are based on AI components, which is what makes the creation of real-time photorealistic avatars possible. Sometimes, voice capabilities are even present. The bad news is that hackers can use all of these great features to bypass most non-presential biometric authentication solutions.
2. Chaos caused by the global COVID-19 crisis
Taking advantage of the volatile economic crisis, opportunistic hackers have engaged in even more fraudulent behaviour. Stealing stimulus checks and unemployment insurance, collecting compensation for dubious COVID-19 treatments, duping victims into contributing to fictitious charities, and other schemes are among the strategies used. In the first half of 2020, there were 1.1 billion fraud attacks, which is more than double the number of attacks in the second half of 2019. According to the Federal Trade Commission, COVID-19-related fraud has cost Americans $145 million.
3. Expect frequent hacks of voice-capturing devices
In 2021, as more businesses and financial institutions use voice authentication, expect an increase in hacks of voice-capturing devices with microphones that record users’ authentication information. If used by financial institutions, this information may be especially vulnerable to attacks because it could contain confidential information such as account numbers, social security numbers, or other personally identifiable information.
4.“Too Good to Be True” COVID solutions
Experian anticipates that fraudsters will continue to exploit nervous and vulnerable customers and businesses as vaccines are distributed and quick COVID-19 testing becomes more widely available. Everyone should be on the lookout for scammers who use the promise of at-home test kits, vaccinations, and treatments as a cover for sophisticated phishing, telemarketing fraud, and social engineering schemes.
5. Manipulating digital lending services
Digital outlets have revolutionized almost every industry, from social networks and dating apps to food distribution, alternative transportation, and vacation rentals. The use of mobile applications has increased even further this year as a result of the separation of people nationwide, with customers ordering everything from groceries to automobiles. Fraudsters have shifted their strategies to take advantage of online transactions, thanks to the number of marketplace platforms and services available and their widespread popularity — particularly in recent months.
A good example of growing tech developments within the financing sector is buy-now-pay-later (BNPL) financing or point of sales (POS) lending. Customers can make payments for products or services in small increments or take out loans for purchases. These types of payment methods have boosted convenience for consumers across many sectors including retail since they can gain approval and make purchases in a matter of minutes. Unfortunately, this development has also attracted unscrupulous third parties who may be able to manipulate these lending systems in criminal ways. BNPL services have enjoyed great growth with regard to transactions recently, which leads to more opportunities for fraudsters to adapt to the market and abuse complex systems. This has led to a push for greater consumer protection across the board and we can expect better security measures soon.
6. New consumer expectations
Consumers nowadays often require their data to be secure. However, any transaction that takes a long time or needs too much data, or is too complicated will be abandoned. In reality, 92% of customers want a fast, frictionless experience that is also as trustworthy and safe as possible. Due to these high demands, banks and retailers must balance avoiding losses with preventing fraud prevention systems from refusing legitimate customers and transactions. Cybercriminals are well aware of the challenges these companies face, and they prey on those who struggle to strike the right balance of safe and frictionless customer interactions.
7. Survival of the fittest for small businesses
Businesses were forced to rapidly transition to digital to meet the needs of customers as a result of COVID-19, and some were better equipped than others. Consumers may have been willing to allow companies time to adapt to the new normal in 2020, but in 2021, they will have higher standards. Businesses with poor fraud detection tools and inadequate online security technologies, according to Experian, will incur significant financial losses in 2021 and beyond.
8. Unclear legal jurisdiction with regard to cross-border fraud
Today’s online retailers and marketplaces can attract more consumers thanks to global commerce. According to Forrester, cross-border e-commerce revenue will hit $627 billion in 2022, accounting for 20% of all e-commerce. Cross-border transactions, on the other hand, are not without danger. Individual jurisdictions find it difficult to adequately track fraud risk since they usually span many countries. Furthermore, data privacy and security laws differ by country (if they exist at all), making it even easier for fraudsters to commit cross-border transaction crimes.