Global insights group TransUnion has detected a significant surge in fraud and criminal activity related to financial services in South Africa, with fraud in this sector surging over 187% in the last year.
As more consumers go online for banking and other financial transactions, TransUnion said that fraudsters are ramping up their efforts in the financial services industry, resulting in an increase in digital fraud attempts.
South Africa’s data tracks global trends, where the rate of financial services fraud attempts increased 149%, the group said.
Across all industries, the rate of suspected digital fraud attempts globally rose 24% when comparing the first four months of 2021 with the last four months of 2020. In South Africa, the overall percentage of fraud attempts increased by 7% during the same time period.
TransUnion monitors digital fraud attempts reported by businesses in varied industries such as financial services, healthcare, insurance, retail and telecommunications and gambling and gaming.
The conclusions are based on intelligence from billions of transactions and more than 40,000 websites and apps.
In financial services, the primary type of fraud being committed involves ‘true identity theft’ – which is when a criminal uses the stolen identity of a customer to commit fraud.
The second and third most reported type of digital fraud by TransUnion financial services customers are first party application fraud and account takeover, respectively.
First-party application fraud is when a consumer refuses to repay legitimately incurred debts and/or falsely claims to be a victim of identity fraud to evade debt. Account takeover is when someone other than the owner of an account uses the account without permission, indicating that the account has been maliciously compromised.
“An interesting dynamic is playing out where we are seeing other industries facing far fewer suspected fraud attempts than what has been observed in financial services. In some cases, we are seeing a decline in such fraud attempts,” said Keith Wardell, product director at TransUnion Africa.
“The key takeaway for businesses is that fraudsters do not treat every industry equally. They often pick and choose an industry to focus on based on the time of year or what businesses are seeing more transactional activity. At times, fraud attempts are simply conducted at random simply to determine if businesses are prepared to meet their challenges.”
The trend of increased digital fraud also aligns with the increase of remote and digital transactions being conducted as a result of the Covid-19 pandemic, the group said.
In late September 2020, 40% of consumers with a financial account said in a TransUnion commissioned survey that they are using digital platforms more frequently since the onset of the pandemic. The same survey found 60% of consumers said that the majority of their financial transactions are conducted via mobile applications.