The financial world is constantly changing, with new features being developed daily. Consumer habits are also evolving, with more and more payment procedures being conducted digitally. From digital wallets, contactless payments, and online banks to cryptocurrency, the financial world has already undergone significant changes, but even more are on the way. Unfortunately, as payments move online, so will fraudsters. We will only be able to deal with them and prevent their malicious actions by being ready for anything they have up their sleeve. By anticipating what to expect from financial fraud in 2023, future-proofing your business, and acting proactively, companies can take proper steps to prevent it.
What can we expect from financial fraud in 2023?
As more and more people are becoming present online, either through shopping, banking, working, or even socializing, the danger is becoming greater. With so much data available online, including customers’ card or account details, social security numbers, and similar sensitive information, fraudsters are constantly looking for new ways to take advantage of it and profit. With the latest technological advancements, such as machine learning and artificial intelligence, fraudsters are quickly becoming more sophisticated and more challenging to detect than ever before. So, let’s see what we can expect from them as we head into 2023.
Increase in synthetic identity fraud
Synthetic identity fraud has become one of the fastest-growing financial crimes in the US, and the losses connected to it are expected to reach US$2.42 billion in 2023. Synthetic identity fraud happens when a fraudster combines fake information with legitimate but stolen ones to create new identities. They use these newly created identities to open fraudulent accounts and conduct fraudulent purchases. With this approach, they can create an unlimited number of fake identities, significantly increasing their reach. Synthetic identity fraud is significantly more complex to detect than traditional identity theft. Fraudsters create a new identity instead of using a stolen one, which means nobody is alerted by their actions. They just seem like standard users.
Using biometrics such as facial recognition, voice, and fingerprint matching can help verify a user’s identity. But, it is only a question of when fraudsters will get over that hurdle and start using computer-generated synthetic faces, which is something businesses will have to be more mindful of in the future.
Dangers of application fraud
Application fraud happens when a malicious actor uses a stolen or synthetic ID to apply for a financial product such as a digital bank account, credit card application, mortgage, or loan. In most cases, their ID will appear legitimate as the rightful owner is unaware of the theft resulting in quick approval by the financial institution. Once the fraud is detected, fraudsters are already long gone with the money. But the company is left dealing with the consequences. Along with financial loss, they will likely experience reputational damage and customer loss.
The rise of the bots
Nearly half of all the internet traffic in the world is currently generated by bots, almost 60% of which are bad bots. Bad bots are software applications that cybercriminals use for their malicious activities. They can be used for various nefarious purposes, such as card fraud, account takeovers, social engineering attacks, spamming to web scraping. While they have been present in past years, recently, they have become more sophisticated than ever. They are constantly improving in mimicking real human behavior, making them even harder to detect, which is why they will dominate the financial crime scene in 2023 and further.
New wave of social engineering attacks
Digital technology and the Internet are becoming more available than ever, especially regarding financial services. Unfortunately, this also means a whole new set of potential victims is encountering online dangers for the first time. Social engineering attacks are especially effective with this type of victim as they are too trusting and can easily be tricked. Fraudsters use psychological tactics such as gaining their trust or exploiting their fear to access sensitive information, convincing the victims they are doing the right thing.
Even though these attacks have been prevalent throughout the years, they were also easy to detect due to spelling errors or nonsense content. The situation is quite different now. The attacks have become more specific and believable, easily tricking unsuspecting victims, especially digital newbies.
New threats in cryptocurrency world
The cryptocurrency world is no longer reserved for experts and a select few. Today, everyone can purchase cryptocurrencies on cryptocurrency platforms or even over digital banking platforms such as Revolut. Fraudsters will always follow the money, which is why it comes as no surprise cryptocurrencies will become even more likely targets in 2023.
Conclusion
As the danger of cybercrime and fraudulent activities continues to grow, it is becoming more necessary than ever for companies and organizations to stay ahead and protect their business. While this applies to all industries, the financial sector is the most vulnerable. The truth is that cybercrime is not going anywhere but forward, with fraudsters and cybercriminals constantly coming up with new ways of exploiting people and businesses. Keeping an eye on future trends and taking proactive steps to prevent them will allow you to stay ahead and protect your business.
