Financial technology, cryptocurrency, and embedded finance options offered by alternative lenders are changing the financial services industry. Juniper Research estimates that organizations must keep up with digital user demands. However, this also means dealing with an evolving fraud landscape. Online payment fraud losses are expected to surpass $206 billion between 2021-and 2025. Companies and chief security officers (CSOs), must adapt to these changes as criminals become more sophisticated.
These six cybersecurity predictions will help security professionals prepare for the changing landscape.
1) Deepfake synthetic identity fraud in a new wave
In 2021, there was a significant increase in deepfake ID fraud. This trend will continue into 2022. Businesses are finding it increasingly difficult to authenticate identities due to the increasing use of artificial intelligence (AI).
Recent advances in deepfake tech allow fraudsters to leverage compromised identity data to bypass authentication controls and create new profiles with documents and facial images. Voice cloning is also available to bypass identity authentication requirements to secure exchanges such as government benefits sign-ups.
A multilayered strategy of technical defenses is required to detect and prevent deepfake identity theft. It is not enough to require identity documents or documents. Organizations need to collect digital and behavioral data. Then, they can use AI and machine learning to spot fraud and analyze interactions.
2) Fraud as Service is only a Click Away
Fraudsters increasingly use automated bots to impersonate companies and socially engineer their victims. Fraudsters can take advantage of advances in voice bots as fraud prevention becomes more effective against traditional cyberattacks.
A large percentage of fraudulent transactions in 2022 will be submitted to fraudsters by legitimate users. They are socially engineered into providing data and using their own devices to submit transactions they believe to be legitimate. Banks around the world are observing this trend. Fraudsters can purchase bots that can contact users, impersonate banks, retrieve passwords, and forward these codes to fraudsters. Fraudsters are likely to expand their operations to impersonate businesses and government agencies.
3) Faster fraud detection with real-time payments
Faster money could mean more fraud. Juniper Research reported that real-time payments (RTPs) increased by 41% in 2019 and 2020 and will increase by 23% in 2020-2025. Fraudsters can quickly monetize and cash out using RTPs, including mobile payments and Buy Now, Pay Later.
Crypto’s lack of regulation makes it appealing for fraud because attackers can remain anonymous and funnel funds in seconds. RTP’s speed poses unique challenges for businesses, as they are often difficult to trace or revoke. RTP is in high demand. Therefore, regulations must be established, and organizations must authenticate transactions and identities across channels within seconds using these faster payment methods.
4) Buy Now, Never Pay
Alternative lenders are available to customers who want to buy now and pay later. Businesses that offer tailored financial products based upon user data could be vulnerable to criminals. Aite-Novarica Group reports that financial technology has a fraud rate of about 0.30%. This is twice the rate for credit cards.
Financial technology companies that do not have the proper identification and fraud protections on their apps and websites risk losing their reputation and causing fraud losses. They also risk enabling further downstream fraud attacks if they don’t provide prompt, thorough fraud reporting to their customers.
5) Supply chain problems increase marketplace fraud
As supply chain problems and inflation continue through 2022, security leaders anticipate more marketplace fraud. Fraudsters will use supply shortages to meet the demand for non-existent goods, enticing customers to part with their money in return.
Fake businesses can be set up with positive reviews. Consumers cannot verify the authenticity of the business, and they then lose money and try to recover funds from their financial providers. In 2022, this is another area in which Buy Now, Pay Later providers will be responsible for significant retail fraud.
6) Digital identity’s convergence identity verification and fraud detection
Smartphones and real-time payment have made it possible to provide seamless, uninterrupted user experiences. Identity authentication is the key to all of this. How can we adopt a secure digital identity approach to merge identity verification and fraud detection?
While the European Digital Identity Scheme shows that governments are making progress in this direction, these are only the first steps. It is crucial to establish secure and reusable digital identities that can be used to facilitate seamless commerce and reduce criminal activity as fraudsters continue targeting authentication and onboarding. This concept could play an important role in fraud prevention in 2022.
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