Looking back at fraud trends in 2022, we saw check fraud continue to be an issue. ACH and wire fraud have also seen an increase in the last year.
Three key factors contributed to this growth: faster funds, connected fraudsters, and competition among financial institutions.
Check Fraud: Most Common Scams and Types
Despite the increasing use of electronic payment products, check fraud remained a persistent issue in 2022, with billions of dollars lost annually. Forged, altered, and counterfeit checks were the most common types of check fraud, and we saw various scams that fraudsters used, such as excess of purchase price, sold goods, and Telegram-driven scams using ‘walkers’.
There are three main types of check fraud:
- Counterfeit checks
Fraudsters use all kinds of scams, but there are a few fraud trends that took center stage in 2022.
Those scams include:
- Excess of purchase price
- Sold goods
- Telegram scams and walkers
Card Fraud Trends
Credit and debit cards were also in the spotlight in 2022, as consumers increasingly depended on and used card payments at higher rates than ever before. Credit card fraud continued to rise, and debit cards remained a commonly used form of payment.
Although traditional credit card fraud tactics became harder to pull off due to the widespread implementation of chip and pin technology, card fraud remained a constant threat. Chip replacement, skimming, and cracking were the three most common card fraud schemes of 2022.
A report by FICO’s Card Alert Service revealed that card skimming fraud in the US has grown by 759% YoY in the first half of 2022, with a 501% increase in the overall number of compromised cards detected. (Source: FICO)
Another trend that remained in 2022 was contactless payments, fueled by technology such as the Apple Watch, and we can expect this trend to continue to grow in the future.
- Chip replacement
ACH Fraud Trends
There has been a steady increase in ACH fraud over the years, according to industry reports. A 2021 report by the Association for Financial Professionals (AFP) found that 76% of organizations experienced attempted or actual payment fraud in 2020, with ACH credit and debit fraud being the most common types of fraud reported.
In 2021, checks and ACH debits were the most susceptible payment methods to fraud activity, with 66 percent and 37 percent of financial professionals reporting their impact, respectively. While check fraud activity remained unchanged from 2020, payments fraud via ACH debits increased from 34 percent to 37 percent.
On the other hand, payments fraud via wire transfers decreased from 39 percent in 2020 to 32 percent in 2021, continuing a steady decline over the years. Financial institutions should prioritize implementing fraud prevention strategies for checks and ACH debits to minimize the risk of ACH fraud losses. (Source: JP Morgan)
Rapid Growth of Mobile Banking and NeoBanks
Mobile banking continued to evolve in 2022, enabling consumers to access banking services anytime, anywhere. However, there were risks associated with this convenience, such as duplicate deposits, where checks were deposited via mobile devices and then again in branches.
Payment apps such as PayPal and Venmo were widely used, but they were hit by a wave of payments fraud in 2022, with Venmo in particular experiencing a significant increase in fraudulent activity.
Venmo and other neobank platforms may have a significant impact on mobile banking fraud as these platforms become increasingly popular for transferring money between individuals. Mobile payment apps like Venmo have become a prime target for fraudsters due to their ease of use and lack of security features. Fraudsters can use various tactics like phishing scams or social engineering to gain access to users’ accounts and transfer funds out of them.
Ominichannel Fraud Prevention
Financial institutions should take an omnichannel approach to prevent fraud in 2022 and beyond. Fraudsters are always one step ahead and will look for access in areas that lack adequate security protection.
Implementing an omnichannel fraud prevention strategy can be a complex process, but there are several key tips that financial institutions can follow to ensure success:
- Assess Your Risk: Begin by evaluating your current fraud prevention measures across all channels to identify potential gaps in security. This assessment should include the identification of high-risk areas, such as mobile banking, online banking, and in-branch transactions.
- Review the Data: Analyze your available data across channels to ensure a more comprehensive view of customer activity. This will enable your institution to identify patterns and trends that could indicate fraudulent activity.
- Leverage Automation: Leverage automation to streamline fraud prevention processes and to reduce the risk of manual errors. This can include implementing real-time fraud detection tools that utilize credible third-party data to identify and flag potential fraud.
- Educate Employees: Provide regular training and education to employees on the latest fraud trends and prevention techniques. This can help to ensure that everyone in the institution is aware of the risks and equipped to identify potential threats.
- Partner with a Trusted Provider: Consider partnering with a trusted provider of fraud prevention solutions to help you implement and manage your omnichannel fraud prevention strategy. This can provide your institution with the expertise, tools, and support needed to effectively manage fraud risk across all channels.
By following these tips, financial institutions can implement an effective omnichannel fraud prevention strategy that helps to protect both customers and the institution from fraud losses.
Implementing an omnichannel payments strategy can be a game-changer for institutions, and applying the right fraud management tools across all deposit channels can reduce the risk of fraud losses. It is essential to stay up-to-date on the latest fraud trends and news, and subscribing to a reliable source of information can help institutions prevent fraud and scare away those pesky fraudsters.