Fraud on the rise in South Africa – what businesses can do to tackle it
The increase of the prevalence and tactics of fraud is significantly hurting trust in digital spaces; which has big implications for both businesses and consumers if something is not done about it.
This is a key finding in LexisNexis Risk Solutions’ Global State of Fraud Report, which outlined that the adoption of AI tools to proliferate phishing, deepfakes and other scams is eroding consumer confidence and trust in digital services.
“Financial institutions and other organisations find it harder to know their ‘real’ customers, and customers can’t be quite sure whom they’re dealing with,” said LexisNexis Risk Solutions.
“It’s a crisis that threatens to undermine…well, everything,” they added.
It emphasises that restoring consumer trust is paramount for the sustainable growth of digital businesses.
Key concerns
As technology has evolved, so have fraud tactics. The expanding payments ecosystem, while offering convenience, creates new vulnerabilities and expands the attack surface for fraudsters.
“However, every attempt to make transactions easier for consumers is also making life easier for fraudsters,” said Stephen Topliss, vice president of fraud and identity, LexisNexis Risk Solutions.
“Societal demand for convenience has left financial institutions facing a difficult balancing act to deliver technological innovation and convenience, while maintaining trust and system integrity,” he added.
Global fraud attacks rose by 19% year on year, according to analysis of the LexisNexis Digital Identity Network platform.
Rapid adoption of AI-powered technology by fraudsters to automate phishing and deepfakes is helping make scams more efficient and convincing, thereby eroding consumer trust in digital services.
Key trends identified in the report includes:
- Deepfakes, phishing, and other digital threats are eroding consumer confidence, potentially driving consumers back to brick-and-mortar interactions;
- Fraudsters are increasingly targeting consumers directly, particularly through APP scams, exploiting legitimate customer authentication;
- The global rise of scams, with South Africa experiencing an average loss of $800 (R~R14,500) per scam, highlights the significant financial impact of this growing trend;
- Money mule networks are becoming more sophisticated, requiring financial institutions to utilise advanced analytics to detect and disrupt them.
- Verifying emerging identities presents a challenge, as these profiles often lack traditional data points and can be difficult to distinguish from synthetic identities;
- The popularity of mobile transactions makes the mobile channel a prime target for fraud, requiring businesses to implement mobile-specific security measures.
The global report also explores the impact of criminal activity on consumer trust; compounded by the fact that fewer than 10% of mules identified by law enforcement are arrested and fewer than 1% are charged.
Hope is not lost
While there are several key worries identified, the report noted that can build strong digital trust and prevent fraud before it occurs.”
The company said that this can be done through collaborative digital identity intelligence.
“A shared collaborative network enables organisations to flag suspicious activity and confirmed fraud events with other members, to help make it harder for fraudsters to operate,” said the company.
This can include data about the device being used, IP addresses and other digital signals, as well as the email address provided.
LexisNexis said that analysing the potential risk associated with these signals can significantly boost organizations’ effectiveness at capturing high-risk transactions.
In one case a major global bank boosted its detection capability 17-fold (1700%). In another, a card issuer improved its risk assessments by a factor of 23 (2300%). In both cases, collaborative data was used.
Despite this, just six in ten organisations have technological fraud prevention solutions in place across all transaction channels.
This comes despite a majority of firms saying integrating digital experience and fraud prevention efforts (72%) and minimising customer friction during checkout (68%) are ‘critical or high’ priority.
“Consumers’ desire for faster, instant service is driving demand for change, including the creation of alternative payment solutions,” said Topliss.
“In response, regulators and central banks are enabling systems, such as instant payment rails, which make transactions easier,” he added.
Broader insights are also essential in the fight against synthetic identities – fake digital profiles created for fraud.
LexisNexis said that robust intelligence can reveal telltale signs, such as synthetic identities are seven times more likely to have no first-degree relatives and 20 times more likely to appear in multiple credit applications over a short time period.
“The worst-case scenario is that consumers cease engaging digitally because they don’t trust the process. Tackling this global issue requires a multi-layered approach, as there is no silver bullet anti-fraud solution,” added Topliss.
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