*Note: Much of this content comes from our partners at Aite Group, who will build out these observations of trends across early, current and late stages of COVID-19 in our Protect webinar on June 25.
Fraud trends observed across various stage of the COVID-19 pandemic
It’s hard to believe that it’s been over three months since the World Health Organization declared the novel coronavirus a global pandemic. As we now know, the beginning of the COVID-19 pandemic saw a rapid consumer adoption of digital channels and transactions, with fear of contraction driving new habits such as:
- Low touch / no touch transactions
- Pre-payment and pick up
- Online shopping
- P2P transactions
- Increased use of digital banking
Since fraudsters thrive on confusion and fear, we also saw an increase in fraudsters taking advantage of consumers in the form of scam calls, offers to lower debt or refinance a mortgage, and even promises of COVID-19 tests. The financial services industry in particular saw an 11% increase in risky transactions after the pandemic declaration, and identity theft was the top reported fraud type for financial institutions. 1
A few months into the pandemic, the financial services industry is embracing a “new normal”
We’re no longer in the beginning stages of COVID-19, and things have even began to normalize (relatively speaking) for many of us as we adjust to working from home and wearing masks at the grocery store — but unsurprisingly, fraud hasn’t paused or slowed down. In fact, we can see fraud rising almost everywhere: in increased call center volumes, a 250% increase in digital channel usage, surges in lending fraud attacks, and mules opening accounts online.
According to the Aite Group, financial institutions were experiencing an 8% decrease in fraud losses prior to the pandemic. The current COVID-19 fraud estimate is a 10-15% increase in fraud losses, which is an almost 20% jump. 2
The financial services industry had to adopt quickly to its “new normal”, from closing in-person branch access to setting up entire fraud and operations teams to work from home. It’s also common to see institutions adopting more relaxed Card Not Present (CNP) fraud strategies, increasing remote deposit capture and P2P limits, and reevaluating their 2020 tech investments. And while nobody can say for certain what the post-COVID “new normal” will look like, the Aite Group predicts that most financial services organizations will have a digital-first customer base, increased surface areas for digital attacks, and — like so many other industries — currently-remote workers continuing to work remotely, even after it’s safe to return to the office.
Solutions for increased online fraud resulting from digital transformations
Financial services organizations are changing and adopting in light of tough times, which can be challenging to do without hurting the customer experience. This is why we recommend a multi-phased approach to verify user identities and establish trust, authenticate consumers, and prevent fraud. In the wake of COVID-19, businesses must look at how they can react and adapt to immediate challenges while planning to transform to a changing environment for the long term:
- React to immediate fraud risks and identity verification challenges within digital channels
- Adapt your operations to streamlines consumer interactions while building trust in faceless channels
- Transform into an organization with a comprehensive plan to adjust to fraud and identity proofing challenges that will be part of a new normal.
Ultimately, we believe that these transformations are leading to major positive growth for the entire industry. To learn more about the fraud trends and solutions coming from different stages of the COVID-19 pandemic, join us for our upcoming webinar with the Aite Group on June 25.