Tamas Kadar, CEO and Co-Founders of SEON, the fraud fighters talks to SMEToday.
The COVID-19 pandemic has prompted drastic change across many industries over the past year. While lockdowns and social distancing measures have meant that customers have had to shop for non-essential items from the safety of their homes, businesses have had to move into the online space to survive – some for the very first time.
The truth is, many of these businesses simply aren’t ready for the threats the online landscape poses and neither are certain customers. Many consumers are new to the online space too. Demographics who previously would have been reluctant to adopt a digital lifestyle are now much more comfortable with eCommerce being a staple point of their shopping experience, but many of these customers require further education surrounding cyberthreats.
To make matters worse, online fraud rises in correlation to online activity, simply because there is more opportunity for it to take place. As such, the sudden boom in eCommerce has also resulted in a sharp spike in fraud.
So, for business leaders that are now refocussing their attention on fraud, understanding the mindset of a professional fraudster and why they target certain people and institutions is essential.
Which customers are being targeted?
The pandemic caused more people to use the internet than ever before, making the pool of potential fraud victims larger than ever. Among them is a proportion of what can be termed ‘digital debutantes’ – first-time internet users who wouldn’t have even owned a computer or smart device were it not for the pandemic making them essential for a whole range of tasks. This cohort may not know what a fraudulent email looks like or the kind of information that is appropriate to share online (your bank card’s PIN number for instance), so they are especially vulnerable.
These people are often the target of account takeover (ATO) attacks and there are a number of techniques being used to do this. Some examples include taking money directly from accounts via compromised online banking apps, or ordering goods using stored card information on an eCommerce site.
What’s more, use of the personal and financial data harvested from customers will be carefully timed – they will be used to purchase goods and items sometimes months after being stolen. So, fraud prevention tactics should focus on the long-term consequences rather than solely on what we can see right in front of us.
Throughout the pandemic there has also been a rapid rise in phishing scams, ID theft and ATO attacks, which have been used to target the most vulnerable. Phishing scams that offer financial aid and false employment websites that steal identities have been used against people who have lost jobs or have been furloughed during the outbreak. The mixture of fear, financial anxiety and social isolation during the pandemic has created the perfect environment for this type of fraud to take place.
What trends are leaving businesses vulnerable?
There are currently a number of trends related to fraud prevention that are making companies more susceptible to fraud too. Across many industries, there is a level of something we call ‘data breach fatigue’ taking place, which can cause fraud prevention to become a tick box exercise and decreasing budget line. This level of mass acceptance can be easily used against companies. If the urgency to prevent fraud is not addressed on a cultural level in businesses, as well as on a technological level, it could spell real issues for not just the companies involved, but entire industries which may come under attack more frequently.
In addition, many businesses think artificial intelligence (AI) and machine learning (ML) are the magic pill for all their fraud woes and leave the technology to fix the problem on its own. This issue is also prevalent within the fraud prevention industry itself, as many solution providers work on this basis.
Yet, this mentality needs to change if we are to keep up with the latest fraud tactics and trends. Supervision is necessary to stay on top of fraud and allows us to analyse the data needed to understand how to react to it. So, the way we use AI and ML is outdated. Fraud prevention is a cat and mouse game and fraud managers and employees should be moving towards a ‘supervised learning’ model to understand what fraud trends are arising and how to respond.
What action can business take?
The circumstances we’ve found ourselves in over the past year have made it clear that businesses need to change the way they look at fraud to stay ahead of the curve. The whole process has been an evolutionary one – we’ve seen fraud tactics, consumer behaviour and fraud prevention all undergo a rapid transformation. Rather than being reactive to the situation, companies need to incorporate the right solutions that are flexible and provide more relevant data points that enable them to predict fraud before it even occurs.
Consumer behaviour changes are likely here to stay and businesses need to make sure they have the facilities necessary to manoeuvre around the online space in the new normal.
To learn more, visit: https://seon.io/