The incidence of scams that shot up during the Covid-19 pandemic and continues to grow rapidly has increased fraud anxiety, according to a new consumer fraud study by AI and analytics firm SAS.
SAS said rampant fraud was also reshaping individuals’ expectations about organisations’ obligation to protect them, and the compromises they were willing to make to enhance security.
The company surveyed 13 500 consumers in 16 countries, for its report. Faces of Fraud: Consumer Experiences With Fraud and What It Means for Businesses, which revealed the immensity of the global fraud problem.
SAS commissioned 3Gem Research and Insights to undertake a global study into some of the key trends in fraud against consumers at the end of 2022. Respondents came from the UK and mainland Europe, the US, Canada, Brazil, the United Arab Emirates, and South Africa.
According to the survey, most consumers (70%) reported having experienced fraud at least once. Four in 10 indicated they had fallen victim to fraud twice or more.
“Nearly half (47%) said they experienced more fraud in 2022 compared to previously, and almost nine in 10 (86%) admitted to being more wary of fraud than in the past.”
The report said the most common fraud strategies reported by survey respondents were attempts to obtain banking details or personal data. Cellphones and email emerged as the communications channels most often used by fraudsters to make initial contact.
SAS risk, fraud and compliance senior vice president Stu Bradley said: “When fraudsters are successful in their exploits, organisations in highly targeted industries like banking, insurance, government, retail and telecommunications serve as unwitting conduits for criminal activity.
“Given that two-thirds of the consumers surveyed said they would change service providers due to fraud or if another provider offered better fraud protections, the potential consequences of inaction are substantial and should not be ignored.”
The report said the sentiment was amplified locally, where 88% of South African consumers indicated that they were willing to change service providers following a fraud incident or if another provider offered better assurance of fraud protection.
Speaking about the local market, SAS head of EMEA fraud, fincrime, and data science Marcin Nadolny said: “In a post-pandemic new normal, consumers have come to expect instant access to just about everything – and the traditional sense of brand loyalty has become very fickle. Much of the spotlight today falls on curating experiences that save customers time and money, whilst delivering brand value that they will enjoy coming back to. Security of customers’ identities, accounts, and payments is crucial in that context.
“When a financial institution is not doing enough to protect consumers from fraud, it ultimately impacts brand reputation and results in poor customer retention. Based on our study, consumers are now open to sharing more personal and behavioural data for better security – and even more open in South Africa than in Europe. Based on our experience leveraging that data and AI is a key to best anti-fraud protection and seamless customer experience.”
The report found that consumers’ shifting attitudes underscored the importance of robust fraud defences, with 96% of respondents in South Africa indicating that businesses should be doing more to protect against fraud.
“The silver lining for businesses? Most of their customers are willing to sacrifice some convenience for stronger safeguards,” it said.
The report found that three-quarters of respondents worldwide said they would agree to more delays and checks in transactions for better fraud protection.
“Eight in 10 are willing to use biometric methods like facial recognition, hand geometry, retinal identification, or voice recognition for payments and transactions. Further, more than half (57%) prefer to use unique identifiers like biometrics to authenticate at the time of transaction versus remembering fixed passwords.
“Closer to home, eight in 10 South Africans expressed a willingness to share more personal data (for example, location, behaviour and so on) with service providers on the basis they use this information to boost anti-fraud measures.”
Despite the elevated fraud risks associated with digital transactions, 86% of respondents anticipated they would continue to use digital services at their current level (65%) or use them even more often (21%).
“The rapid rise of generative AI tools will only make it easier for fraudsters and organised criminal rings to outmanoeuvre traditional fraud detection methods.
“Employing layered fraud detection capabilities that use the same advanced analytics technologies can help organisations beat the criminals at their own game. Those who rise to their customers’ expectations can turn fraud prevention into a loyalty builder and, ultimately, a competitive edge that helps them automate and grow their business while cutting fraud losses,” Bradley said.
Dieketseng Maleke is the content editor of Personal Finance.