Financial Institutions Face Growing Threats from the Evolving Fraud Landscape in 2024

As 2024 approaches, financial institutions (FIs) must contend with a landscape of fraud that is becoming more sophisticated and complex thanks to cutting-edge technologies like artificial intelligence (AI). The challenges extend beyond new threats, as traditional risks are gaining new life through the application of AI by fraudsters. Faced with surges in fraud attacks and new regulatory standards, FIs are compelled to enhance their fraud prevention measures, especially for customer-initiated transactions marked as scams. Key findings from the "2023 Fraud Insights" report, based on the analysis of billions of banking and payment transactions, offer crucial insights for FIs to strengthen their fraud-prevention strategies in 2024.

Key Findings:

Increase in Fraud Attacks:

    • Compared to H1 2022, total payment volumes rose by 22%, with attempted dollar and unit attack rates growing by 18%.

    • The surge in fraud attacks, particularly in international payments, highlights the need for FIs to adopt advanced technologies for effective fraud prevention.

Fraud Trends Repeating:

    • New scams, money mules, and sophisticated tactics are emerging along with historical fraud threats related to customer onboarding and first-party fraud.

    • Urgent investments in AI, machine learning, and real-time analytics are emphasised to combat the speed and variety of evolving scams.

Peer-to-Peer (P2P) Fraud Trends:

    • Attempted P2P-fraud dollar volume decreased by 18%, indicating positive steps in fraud controls.

    • The average attempted fraud rate for P2P transactions decreased by 38%, with higher risks associated with web-based transactions than mobile-based ones.

International Transaction Fraud:

    • International payment fraud is rising, with attempted fraud loss per individual transaction increasing from $47 (Q1 2022) to $52 (Q2 2023).

    • The average dollar amount for attempted fraud in international transactions rose significantly, reaching nearly $12,000.

    • Fraudsters are shifting focus from longer-term scams to shorter-term schemes in international transactions, necessitating strategic investments in prevention measures.

Strategies for Combating Fraud:

    • FIs are urged to adopt a multi-pronged approach, including next-gen fraud prevention, modernised fraud analytics, and cloud technology for scalability and efficiency.

    • Collaboration and information sharing among FIs and law-enforcement agencies are crucial for building collective intelligence and innovation to combat evolving fraud threats.

The report underscores the importance of staying vigilant, adaptive, and collaborative in the face of the dynamic fraud landscape. FIs must leverage advanced technologies, embrace modernised strategies, and foster industry-wide cooperation to protect their organisations and customers effectively. By understanding the latest trends and implementing robust strategies, FIs can fortify their position against the ever-evolving challenges of fraud.

Defoes