Fraud attacks are at an all-time high. According to the FTC, in 2023, U.S. consumers reported losing more than $10 billion to fraud, a 14% increase over 2022 and the highest dollar amount ever reported.
Consumers and businesses alike are concerned about fraud, and rightly so. Generative AI (Gen AI) continues to create new, sophisticated fraud schemes, opening a world of challenges and opportunities for companies across industries as they navigate the ever-changing fraud landscape. When implementing fraud prevention strategies, businesses should consider consumer preferences regarding security while ensuring they don’t undermine the customer experience.
Consumers are growing more concerned with certain fraud types
As fraud becomes more prevalent in people’s lives, many are becoming resigned to the inevitable fraud. As consumers’ activities and habits evolve, they are instead becoming more worried about specific types of fraud. For example, Experian’s 2024 U.S. Identity and Fraud Report found that more than half of consumers say they are concerned about the risks associated with conducting activities online, with identity theft (84%) and stolen credit card information (80%) listed as their top online security concerns, representing a sizeable jump of more than 20% from the previous year for both types. Online privacy (67%), phishing emails or phone scams (65%), and false information or fake news and ads (49%) round out people’s top five online security concerns.
With people feeling more cautious about online activities, 82% of consumers say they expect businesses to react to their fraud concerns, and 63% say it’s extremely or very important for businesses to recognize them online. This helps build trust in companies, with 81% of consumers saying they’re more trusting of businesses that can accomplish easy and accurate identification.
Businesses turn their focus to Gen AI fraud and other advanced technologies
Businesses must carefully balance their identity protection and fraud-prevention strategies while ensuring a seamless consumer experience. This has become increasingly challenging given fast-emerging forms of fraud. Forty-five percent of companies cite cybercrime as the operational challenge, putting the most stress on their businesses. Beyond that, Gen AI fraud and/or deepfakes (41%), P2P payment scams (40%), identity theft (39%), and transaction fraud (38%) round out the top five stressors for businesses.
Companies are paying close attention to the growing use of advanced technology and what it means for their businesses. Fraudsters have quickly adapted to Gen AI, using it to create fraud schemes at scale. Companies know that there is great risk there, with 70% stating that AI fraud is expected to be the second greatest challenge for their businesses.
While new technology can challenge the fraud landscape, there is also abundant opportunity. Consumers have shown an appetite for more advanced types of identity recognition techniques, like behavioral analytics, to verify their identities. People said that physical biometrics (71%), PINs sent to a mobile device (70%) and behavioral analytics (66%) evoke the highest sense of security for them. That said, less than 30% of businesses have implemented these solutions, representing an opportunity for companies to consider investing in these to combat fraud.
How businesses can navigate fraud now and, in the future
Proactivity is the key to staying ahead of fraud. To protect themselves now and in the future, businesses can:
- Work with industry specialists to set up innovative fraud strategies: Businesses need to review their current strategies and invest in the right tools to address the evolving complexity of fraud schemes. They should work with a trusted partner that can help them put in place a multilayered, orchestrated approach to fraud prevention and identity verification that leverages data, advanced analytics and technology to identify and mitigate the risk of a variety of fraud types while enabling genuine customers to enjoy a frictionless online experience.
- Invest in more advanced technology and identity verification techniques:
Our data shows consumers are open to using innovative identity verification methods to make fraud and risk decisions. Businesses should continue expanding their investments in machine learning and AI-driven solutions that detect and prevent new fraud threats in real time. Implementing enhanced fraud detection techniques, such as behavioral analytics and signals, can fight sophisticated fraud attacks, such as Gen AI-enabled fraud.
- Monitor and analyze trends: With fraud analytics, companies can regularly analyze fraud data to identify trends and emerging threats. This can help adapt and refine prevention strategies. Additionally, leveraging machine learning can help businesses automatically analyze many transactions and data sets, extending fraud prevention measures across the entire customer portfolio.
- Educate employees and promote a security culture: Companies should prioritize education and training for all employees to create an environment that encourages vigilance and easier identification of fraud schemes. They can do this through training programs and exercises like simulated phishing scams. This can help create a culture where employees feel confident and comfortable reporting potential fraud. Companies should prioritize security and transparency from the inside out, as 81% of consumers say they’re more trusting of businesses that can accomplish easy and accurate identification, while 48% trust companies that demonstrate signs of security.
By embracing advanced technologies, fostering a security culture, and prioritizing fraud prevention, companies can better prepare for the future and build resilience against modern fraudsters' ever-evolving threats.
