Surge in fraud cases in digital banking sector - Sabric report

The digital banking sector faced an unprecedented 45% increase in fraud in 2023, resulting in a 47% surge in financial losses.

This is according to the annual crime statistics for 2023 released this week by the South African Banking Risk Information Centre (Sabric).

Sabric said there had been a surge in cybercrime, including phishing, ransomware, and online fraud.

Of particular concern was banking app fraud, which accounted for 60% of all digital banking crimes.

Sabric noted that the growing reliance on online banking platforms, combined with the sophistication of cybercriminals, had made the digital banking sector a prime target for fraudsters.

“The increased use of banking apps by customers, while convenient, has also opened up new opportunities for cybercriminals,” Sabric stated.

The report also highlighted the concerning trend of cybercriminals utilising generative AI for fraudulent activities, further complicating efforts to combat cybercrime.

Sabric urged both users and financial institutions to stay vigilant by adopting advanced security measures, including multi-factor authentication, biometric security and regular software updates.

Card fraud also remained a major issue in South Africa, with online shopping and digital payments contributing to the rise.

“Card Not Present” (CNP) fraud, where fraudsters exploit card details in online transactions, accounted for 68% of total card fraud losses, a rise of nearly 19% from the previous year.

Sabric said it continued to encourage merchants to implement two-factor authentication and other security measures to reduce CNP fraud.

While card fraud has increased, Sabric reported a positive decline in counterfeit card fraud, which decreased by 48%.

This success was attributed to the adoption of EMV chip technology, stronger authentication methods, and the growing use of contactless payments, it said.

ATM attacks, particularly in Gauteng, continued to plague the banking sector.

The report stated that in 2023, there were 196 incidents involving the use of explosives to gain unauthorised access to ATMs, only one less than the previous year.

“Although dye-stain was duly activated during ATM attacks using explosives, several instances occurred where the perpetrators, notwithstanding the activation, still removed the stained cash.”

In contrast, the number of robberies at state owned banking institutions decreased by 41%, which Sabric attributed to the shift from cash to card-based payments for SASSA grant recipients.

“The move to card payments has reduced the need for cash, decreasing the opportunity for robberies at grant payment points,” Sabric said.

Another alarming trend is the rise in application fraud, particularly in vehicle asset finance (VAF) and mortgage loans.

“Application fraud in South Africa refers to fraudulent activities that occur during the process of applying for financial products or services and typically involves the use of false or stolen information to obtain credit, loans, insurance, or other financial benefits,” the report explained.

Fraudulent applications for VAF more than doubled in 2023, while mortgage loan fraud increased by 46%.

Unsecured fraud involving financial products or credit obtained without collateral also rose by more than 100%.

Sabric emphasised the importance of adopting a comprehensive approach to tackling financial crime, combining technology, regulation, and public awareness.

“A coordinated effort between banks, law enforcement agencies, and regulatory bodies is crucial in mitigating the risks posed by financial crime,” the report stated.

The Mercury