Fraud is one of the most ancient forms of crime in history.
According to the aptly named Fraud.com, there are references to fraud as early as 300 BC when two bad actors named Hegestratos and Zenosthemis were caught for insurance fraud involving their ship and its cargo. While this might have been one of the first instances, it was certainly not the last.
The digitisation of the financial services sector has brought with it huge benefits to the industry, from improved agility and new product offerings, to enhanced customer service. But the advancement of digital also presents more opportunities for fraudsters to capitalise on vulnerabilities.
With this in mind, GFT recently set out to shine a light on just how prolific fraud is for retail banking customers.
Fraud: a very real threat
The first thing we set out to do was to discern how common an issue fraud is. The results show that it is the younger generations, not older, who are being targeted and falling prey to rampant bank fraud.
Research showed that almost half (48 per cent) of 25 to 34-year-olds have, or know someone who has, been a victim of financial fraud, compared to only 31 per cent of 45 to 54-year-olds and 24 per cent over 55s.
This may come as a surprise to those who believe that their elderly parents and grandparents are perhaps more likely to be targeted by bad actors and conned into fraudulent transactions, when in fact it is digital natives, who are more comfortable and spend much more time online, that are more likely to be targeted.
As technology has evolved, so have the ways in which bad actors can defraud consumers.Despite this, the older generations are losing the most at £938 on average according to our data. This drops to £574 on average across all respondents, which is more than a quarter of the average monthly salary in the UK of about £2,253.
Despite 63 per cent of those affected by fraud getting their money back within three days, the impact of fraud is being felt by consumers across the UK, and is even starting to hurt consumer confidence.
Tech to the rescue?
Given that fraud continues to affect consumers, it is no surprise that it is starting to have an impact on how consumers feel about their banks.
Specifically, GFT data found that more than a third (35 per cent) of 25 to 34-year-olds are worried that their banks' security measures are not fit for purpose. This dips down to 22 per cent overall of respondents who do not believe their banks’ security measures are currently fit for purpose.
Confidence is essential for banking customers. This diminishing confidence could see customers make their voices heard with their feet and look elsewhere for more secure options.
To counteract this, banks are introducing new security measures that they hope are more comprehensive. The flip side to this is they tend to require more information and access to their customers' data.
Because of this, GFT surveyed correspondents on how comfortable they are with new banking security measures.
The data showed:
Security measure | Percentage of respondents comfortable |
|---|---|
Instant spending alerts whenever a transaction is made on your card | 49% |
Remotely being able to freeze my cards from taking payments | 40% |
Location tracking (ie tracking your phone location to spot if your card has been stolen/used in a different location) | 31% |
Behavioural analytics (ie monitoring your everyday behaviour, such as mouse movements and typing abilities, to flag abnormalities) | 25% |
As it stands, only 8 per cent of consumers are not happy with their banks using any of these security measures. This should give banks confidence that they are not being overly invasive when it relates to keeping their consumers' money safe.
Ensuring security for the future
While banks strive to provide a secure platform at all times, as technology has evolved, so have the ways in which bad actors can defraud consumers.
We have seen this advance recently with the explosion in artificial intelligence technology, which is helping to design nefarious products that can be purchased and instantly provide the tools for advanced phishing scams.
Thankfully, technology is also providing banks with an arsenal of advanced security measures that our latest research shows customers are happy with and confident in.
While younger generations remain more likely to fall victim to fraud, continued efforts will be needed to ensure they are getting the education they need to avoid the growing presence of advanced scams and fraud they are likely to be targeted with while they spend time online.
Richard Kalas is retail banking client solutions director at GFT
