New technology that allows consumers instant access to money drove up the opportunity for fraud. Three key factors contributed to this growth: faster funds, connected fraudsters and competition. Additionally, there was no slowing down for check and card fraud last year. Check fraud is one of the most significant challenges financial institutions are still facing. It is the most common form of financial crime just because it is so easy to execute. Although check fraud continued to rise, card fraud took the spotlight in 2018. Learn how to spot and prevent fraud at the point of presentment.
Check Fraud: Most Common Scams and Types
Check fraud is still and will continue to be, a persistent issue. Despite the advent of electronic payment products, check fraud accounts for billions of dollars in losses each year, making this tactic a prime target for fraudsters.
There are three main types of check fraud:
- Counterfeit checks.
Fraudsters use all kinds of scams, but there are a few that took center stage in 2018.
Those scams include:
- Excess of purchase price
- Sold goods
- Surprise bonanzas
Card Fraud: Schemes and Trends
2018 was the year credit and debit cards took center stage, and we said goodbye to cash. Consumers were more dependent upon and used card payments at increasingly higher rates in 2018 than ever before. Credit card fraud increased, and debit cards remained one of the most frequently used forms of payment in 2018. Card fraud remains a constant threat and will continue to be despite continuing improvements to card security. With the widespread implementation of chip and pin technology, it has made traditional credit card fraud tactics harder to pull off, but nevertheless, it remains a persistent problem. While fraudsters have many ways to scheme consumers, the three most common card fraud schemes of 2018 were:
- Chip replacement
One card fraud trend that rapidly grew in 2018 was card-not-present (CNP) fraud. The reason behind this rise in CNP fraud was that chip and pin technology made card skimming much harder, but stealing card data online remained prevalent. Another card fraud trend that trended mid-to-late last year was contactless payments. EMV chip cards started to fade away and will continue to as contactless payment methods fueled by technology like the Apple watch will continue to grow in 2019.
Rapid Growth of Mobile Banking
The evolution of mobile banking has allowed consumers to take an anywhere, anytime approach to banking. Sure, mobile banking is easy and convenient, but there are risks associated with it. One crucial factor for both consumers and financial institutions to be aware of is duplicate deposits. Nearly half of mobile banking users have deposited a check with their mobile device in the past year, and 59% of those users do so at least once a month. The duplicate deposit issue occurs when, after a check is deposited via a mobile device, it’s taken into a branch and deposited again. Also, payment apps such as PayPal and Venmo were widely used in 2018, allowing consumers to transfer funds between accounts at different FIs. Unfortunately, Venmo was hit by a wave of payments fraud in early 2018, and it remains unclear what caused the first quarter’s increase in fraudulent activity.
Due to the rise in technology, financial institutions should take an omnichannel approach to how to prevent fraud. Fraudsters are always one step ahead as they look for access in areas that lack adequate security protection. Implementing an omnichannel payments strategy can be a game changer for your institution. Taking that one step further to apply the right fraud management tools across all deposit channels can reduce the risk of fraud losses. It is also essential to stay up-to-date on the latest fraud trends and news, so be sure to subscribe to this Fraud Fighters Blog to get the weekly updates. Boosting security, implementing fraud prevention solutions, and knowing the latest and greatest on payments fraud can help prevent fraud and scare away those pesky fraudsters in 2019.