Old methods, new technologies drive fraud losses
GenAI, deepfakes and cybercrime are critical threats putting intensifying pressures on businesses, according to Experian.
Top online security concerns for consumers
According to the FTC, consumers reported losing more than $10 billion to fraud in 2023 alone, representing a 14% increase over the previous year and the highest dollar amount ever reported. Experian’s research shows over half of consumers say they’re somewhat or very concerned about conducting activities online with identity theft (84%) and stolen credit card information (80%) as their top online security concerns, an over 20% jump from the previous year.
Additionally, online privacy (67%), phishing emails or phone scams (65%), and false information or fake news and ads (49%) round out the top five online security concerns for US consumers.
While consumers want the convenience and accessibility of digital transactions, they don’t want to compromise on security. As such, consumers’ expectation that businesses will react to their fraud concerns has remained high at 82%. People understand the connection between identity verification and a positive customer experience with 63% saying it’s extremely or very important for businesses to be able to recognize them online.
The ability to repeatedly identify consumers can translate to trust. 81% of consumers say they’re more trusting of businesses that can accomplish easy and accurate identification. The report also found that financial services companies were the most trusted, with retail banks, P2P lending and buy now, pay later financing all listed as top trusted organizations by US consumers.
Funding for GenAI fraud detection and prevention is lacking
This year’s data found that companies reported high engagement and investment in GenAI, GenAI security solutions and AI models that improve customer decisions. With that said, businesses recognize the challenges of GenAI with 70% of businesses saying that AI fraud is expected to be the second greatest challenge for their business. In fact, Tier 1 businesses listed Gen AI fraud as their top stress point.
Despite those concerns, funding for GenAI fraud detection and prevention is lacking. When asked about the most important potential investment areas for 2024, businesses ranked detecting and preventing GenAI fraud and deepfakes as the 12th most important investment area behind prevention for legacy fraud types like identity theft and first-party fraud. As the widespread use of GenAI continues to accelerate, businesses will need to be prepared to address this evolving fraud.
Fraudsters have also seen the benefit in leveraging GenAI to conduct fraud on more widespread levels. Just as it does with businesses and consumers, the technology allows fraudsters to quickly create images, text, and video to create fake bank statements, IDs, duplicate company websites, and even deepfakes of company executives with their voice and likeness.
Currently, multifactor authentication (48%) and the use of passwords (45%) are the most used fraud prevention methods. Among the methods used most recently, physical analytics (71%), PINs sent to a mobile device (70%) and behavioral analytics (66%) evoke the highest sense of security for consumers, with security questions (63%) and passwords (58%) rounding out the top five.
Interestingly, while consumers have greater trust in physical biometrics and behavioral analytics, less than 30% of businesses are using these solutions — showing companies could consider investments in physical and behavioral analytics to verify identities and combat fraud.
“With digital transactions increasing every day and new technology changing the fraud landscape, our latest report underscores the need for businesses to review their current strategies and invest in the right tools to address the evolving complexity of fraud schemes of the future,” said Kathleen Peters, Chief Innovation Officer for Experian in North America. “Companies need to take a multilayered approach to fraud prevention that leverages the right data, analytics and technology in an orchestrated way to combat fraud and build trust and positive experiences with legitimate customers.”