Fraudsters are opportunistic criminals and 2022 and the first few months of this year brought opportunities like never before, according to Experian.
This volatility perpetuated an unpredictable atmosphere for both businesses and consumers alike.
The report found that consumers and businesses alike are keeping fraud and security top of mind amid uncertain economic conditions with nearly two-thirds of people surveyed reporting they’re very or somewhat concerned with online security. Consumers’ top concerns include identity theft (64%), stolen credit card information (61%) and online privacy (60%).
In addition, just over half of businesses report a high level of concern about fraud risk with leading areas including transaction fraud, cybercrime and identity theft. Nearly 70% of businesses report that fraud losses have increased in recent years and authorized push payment fraud is the leading fraud event type experienced by 40% of businesses.
Consumer fraud concerns rise
Consumer expectations continue to rise with 85% of people expecting businesses to respond to fraud concerns. Most businesses say they’ll increase their fraud budgets by 8% to 19%, but they’ll also need to align with consumer expectations.
For example, 85% of people said physical biometrics are the most trusted authentication method, yet only a third of businesses use it. The report found though that some businesses are listening to consumers with 32% of them saying they’ll be investing in physical biometrics solutions.
Businesses also need to ensure they’re delivering seamless online customer experiences. In fact, 51% of consumers considered abandoning a new account opening because of a negative experience, and 37% said a bad experience caused them to take their business elsewhere.
Machine learning and fraud prevention
To help address fraud in 2023, nearly 60% of businesses are already emphasizing or are looking to build machine learning capabilities into their fraud identification and prevention strategies. Machine learning can help businesses analyze large numbers of transactions and data sets so that fraud risks can be identified.
For those businesses currently using machine learning models, 90% reported a high level of confidence in their effectiveness at fraud detection and prevention, and 87% reported high levels of confidence at customer authentication. This shows that incorporating this innovative technology into fraud prevention strategies will be table stakes for businesses to keep up with growing fraud risks and consumer expectations.
“As fraudsters become more sophisticated and opportunistic, businesses need to proactively integrate the latest technology, data and advanced analytics to mitigate the growing fraud risk,” said Kathleen Peters, Chief Innovation Officer for Experian’s Decision Analytics business in North America. “With the right identity and fraud prevention solutions in place, businesses can take a multilayered approach to verify identities, properly treat fraud and provide a frictionless customer experience that builds trust.”