- According to a recent report by Feedzai, many consumers are at serious risk as a result of their ignorance of scams.
- One in ten victims of fraud have lost more than $8,400 to con artists, with romance scams ranking as the most prevalent fraud type.
- With 42% of their approaches coming from social media, con artists are evolving and taking advantage of unwary consumers more and more to turn them into money mules.
- The majority of customers (77%) say they will leave their bank if they are not reimbursed by their bank should they be the target of fraud.
- To combat fraudsters and reassure their customers—53% of whom feel safer knowing their bank is using AI to protect them—banks must adopt cutting-edge technologies.
The Human Impact of Fraud and Financial Crime on Customer Trust in Banks has been published by Feedzai, the first RiskOps platform for financial risk management in the world. The study, which was based on data from 4,000 consumers in the US and the UK, shows how fraudsters are exploiting the growing knowledge gap about fraud and highlights the urgent need for banks to inform and safeguard their customers using technology.
The study finds that even though more than half (56%) of respondents have fallen victim to a financial scam, many people still are unable to recognise and differentiate between the various kinds of financial crime.
With over half (53%) of consumers believing they should be compensated if they fall victim to a scam or third-party fraud, it follows that many consumers believe the onus of reimbursement rests with their bank. Three-quarters (77%) of respondents in the UK and the US said they would change banks if they weren’t reimbursed.
Although romance tops the list, scammers are adjusting.
The most common type of scam reported is a romance scam, with a third (36%) of respondents reporting either having been scammed themselves or knowing someone who has. Targeting emotionally weak people is arguably one of the cruellest forms of consumer-facing fraud, with 13% of those conned losing more than $8,400 and suffering serious distress.
Romance scams are only one type of financial crime, according to Feedzai’s research. Money mules, or people whose bank accounts are used by fraudsters to transfer money, are also becoming a more significant part of the economic business models of cybercriminals.
Particularly in the US, con artists target unsuspecting customers to use them as money mules. A quarter of US consumers (24%) are unaware of the dangers of being a money mule, despite the fact that nearly half of consumers have been approached to receive money. Only 17% of respondents in the UK were unaware of the risks involved in acting as a money mule, and only a third of those (35%) had been approached to receive money. With 42% of respondents contacted via social media, it is clear that fraudsters prefer this platform.
AI increases comfort, but banks must do it correctly.
Emerging technologies like ChatGPT present new difficulties for banks and financial institutions in combating financial crime as criminals become more aggressive and inventive.
In response, banks must take action and adopt cutting-edge technology to safeguard their clients from fraudsters. Over half (53%) of respondents reported feeling safer knowing their bank uses artificial intelligence to protect them, demonstrating the enormous potential for AI to keep customers safe while also fostering customer loyalty.
Since 46% of respondents said they would consider leaving their bank if it stopped a legitimate transaction, even if the problem was quickly resolved, accuracy when using AI is crucial. The report emphasises how crucial it is for banks to put transparency, strong security measures, and specialised communication plans first in order to ensure client loyalty and satisfaction.
“Our latest report highlights a major issue in terms of public awareness and education surrounding the distinctions between various types of financial crimes,” said Pedro Barata, Chief Product Officer at Feedzai.
“Banks need to build trusting relationships with their customers more than ever because of the rise in digital banking services, customers’ willingness to switch banks, and the ongoing cost of living crisis. It has never been more obvious how AI and other cutting-edge technologies can improve security protocols and better protect customers from these threats.