The State of Financial Fraud

3 types of retail fraud_featured image

A major risk facing consumers and businesses alike is financial fraud. In our post-COVID world, financial fraud has become a constant and rapidly-evolving threat; new challenges, protections and practices are being implemented all the time and in this blog, we've pulled together some of the key findings and latest updates on financial fraud in the UK and Europe.

Key findings about financial fraud in 2021

Impersonation fraud

One of the most common types of financial fraud in the UK is impersonation fraud. In the first half of 2021 alone, cases of this type of fraud nearly doubled. There are several reasons for this growth, with one of the biggest being the difficulty some consumers have with rejecting requests for personal information.

This type of fraud isn’t just a problem in the UK, either; in a 2020 survey of European consumers, 22% of respondents said that they had been contacted by someone pretending to be from a legitimate organisation and had been asked to provide or confirm personal information.

What is it?

In essence, an impersonation fraud attempt occurs whenever an individual pretends to be contacting the victim on behalf of a legitimate institution.

This type of fraud is usually based around emails, phone calls and text messages informing them that some urgent action or information is required. The victim typically provides the requested information without realising that the person is a bad actor (or sometimes proceeds, despite red flags).

Once the fraudster has the information they're looking for, they will start to take control of the victim's accounts or assets, in a very short space of time.

People under 35 are more at risk from impersonation scams (UK Finance)

As you can see, this type of attack is relatively simple to pull off. It uses social engineering; even then, it's a fairly low-effort form of social engineering.

What impersonation fraud relies on is the victim’s compliance or ignorance, and unfortunately, consumers are becoming more prone to fall for this fraud.

That's largely because nearly one in five consumers doesn't feel comfortable saying no to requests for information that appear to be official. Put another way, a fraudulent email, text message or phone call only needs to be sent to around five individuals for it to be successful.

Authorised push payment fraud

Authorised push payment fraud (APP) is a type of impersonation fraud that has become so significant in its own right that it deserves discussion in these findings. It's one of the most prevalent types of financial fraud and its popularity is growing as quickly as other forms of impersonation fraud.

What is it?

Authorised push payment fraud is a type of fraud in which the victim is persuaded to authorise payment to an account the fraudster owns.

Like impersonation fraud (of which APP is one example), APP relies on social engineering tactics. The fraudster impersonates a legitimate party that the victim will think they owe money to or needs to pay for a product or service.

These types of scams work especially well if the victim is made to believe they’ll face penalties if they don’t pay immediately. They are usually hurried into providing payment and deliberately not given enough time to vet the fraudster or spot potential red flags. During 2021 and 2022, the majority of APP fraud occurred online.

In 2021 APP was the most used type of fraud

Like impersonation fraud, it can be tempting to assume that APP would not be as successful as it is because it doesn't rely on overly complicated tactics. But the truth is that this has been the most popular type of fraud over the last year.

According to UK Finance, APP fraud accounted for 44% of financial fraud attacks in the UK.

Account takeover fraud

The last type of financial fraud we will look at is account takeover fraud. Unlike impersonation and APP fraud, account takeover fraud is relatively complex to pull off. This may be why it's less popular among fraudsters but this complexity can also make it harder for the average consumer to spot and prevent.

What is it?

Account takeover fraud happens when a fraudster collects the information needed to access a victim’s accounts. For example, this could include passwords, contact information or answers to security questions.

Once they have sufficient information, the fraudster contacts the victim's card issuer or bank and pretends to be the victim. This allows them to change settings in the victim's account, transferring control to the fraudster.

"Account takeover fraud losses reach £15.4 million"

Account takeover fraud losses reached £15.4 million in 2021. Account takeover fraud is usually considered a type of card ID theft, a segment of financial fraud that led to £26.3 million in losses in 2021.

Prevent your business and customers against financial fraud, with JT

The good news for businesses is that you aren't alone in your fight against fraud.

As a leading, government-owned mobile network operator (MNO), JT has built relationships with hundreds of other MNOs, globally, to access the data that is needed to protect consumers and businesses against fraud. JT Fraud Protection Services provides a range of counter-fraud solutions for financial institutions, e-retailers, crypto exchanges, healthcare organisations, gaming platforms and much more.

Reach out to our team today to learn more.