Top 7 Fraud Trends — How to Prevent Them

Fraud poses significant risks to both businesses and customers, resulting in financial loss, diminished customer trust, reputational damage, and potential legal penalties. The solution lies in the implementation of robust fraud prevention strategies and staying informed about the latest fraud trends. This way, you can protect your business and maintain your customers’ trust.

Also, if you think your business’s chances of fraud are low, think again.

An FTC report states that fraud results in a whopping $10 billion loss in 2023. This underlines the heightened need to understand current fraud trends and anticipate emerging ones.

Artificial intelligence (AI) is constantly gaining popularity and usefulness. More and more businesses are preventing fraud in real-time using AI. Through this blog, learn about the top emerging fraud trends in 2024 and strategies to protect your business.

Top 7 emerging fraud trends in 2024 and beyond

Fraudsters are constantly coming up with new ideas to commit varied digital fraud, but you can take steps to mitigate these risks. Here are the top fraud trends you need to know for 2024.

1. Synthetic ID fraud is a major reason for concern

Synthetic identity fraud involves using stolen identities for fraudulent activities. In this process, fraudsters commit identity theft to obtain personally identifiable information. Here are some notable points:

• Fraudsters include data from the stolen identity and add information in the remaining areas to create new accounts with forged identities.

• When security systems check an ID for verification, the system might falsely accept synthetic identities as real ones if the particular verification data comes from a stolen ID.
• Current fraud prevention strategies find it difficult to differentiate and weed out synthetic identities.
• Accurate detection and prevention of synthetic identity fraud require advancements in the identity verification process. Solution providers, like Hyperverge, with a strong digital identity verification system can help detect a synthetic identity quickly and accurately.

2. Account takeover fraud is on the rise

Account takeover fraud is an identity fraud in which the fraudster steals a customer’s credentials to perform unauthorized transactions. These credentials can access a computer, bank, or digital wallet account. Here are some important highlights:

• Account takeovers require common data-stealing and ID theft techniques such as phishing emails, malware, data breaches, or purchasing stolen data from the dark web.

• In this case, fraudsters gain unauthorized access to an account, they can do anything, from changing account credentials to making financial transactions and laundering money. 

• Since this fraud does not require fake accounts, businesses need to implement strong fraud detection strategies after the ID verification phase. In this case, an effective geolocation API can help detect fraud by verifying the IP address and the physical location of the transaction with the cardholder’s address.
  

3. New digital payment systems provide more opportunities for contactless fraud

Contactless payments include NFC-enabled cards and digital payment platforms, such as GooglePay, ApplePay, and AmazonPay. These platforms utilize mobile phones rather than physical cards or cash to make digital payments. Here are some significant points to note:

• According to the UK Finance report, contactless fraud cases increased by 82% in 2023.

• The rapid growth of NFC-enabled devices (even wearable devices) and the increasing use of smartphones give fraudsters more opportunities to commit payment fraud.

4. AI and ML are paramount in the fraud landscape

The utilization and dependence on Artificial Intelligence (AI) and Machine Learning (ML) have grown significantly in recent years and continue to do so. Consequently, fraudsters and anti-fraud systems increasingly use AI and ML algorithms to gain competitive advantages. Some important points to highlight:

• Fraudsters can use AI’s ability to automate tasks to commit fraud on a larger scale. They can also leverage Generative AI (GenAI) for image manipulation and creating deepfakes, which can help them bypass traditional ID verification techniques.

• On the other hand, businesses can deploy anti-fraud solutions that utilize AI for fraud prevention to reduce the risk of fraud.

• Fraud mitigation solutions can use generative AI to implement tools such as behavioral biometrics (behavioral analysis) and real-time monitoring to cover more ground for better risk assessment.

• This way, businesses can distinguish bad actors from legitimate customers and protect sensitive information such as account details or consumers’ personal information. 

5. Fraudsters are getting better at pig butchering

Pig butchering is a prevalent type of financial fraud categorized under social engineering. It involves deception and cunning rather than technical expertise, making it crucial for people to remain vigilant against such fraudulent tactics. Here are some significant points:

• The term ‘Pig Butchering’ comes from a common farmer’s practice of feeding pigs and ‘fattening’ them before slaughtering them to gain more money.

• Similarly, a pig butchering scam starts when a person initiates contact and establishes a connection with the victim, usually through social media messaging apps. The scammer invests weeks or months building trust with the victim.

• Finally, the fraudster can coax the victim into seeking financial help directly or indirectly (e.g., investing in a faux investment scheme) before disappearing with the victim’s money.

6. Money mules are on the rise

A money mule is a person who unknowingly facilitates money laundering for a fraudster posing as a ‘friend.’ Thus, financial institutions must inform customers about money laundering to reduce fraud losses. To understand better, here are some pointers:

• There has been a surge in the popularity of willing-money mules. These people knowingly conduct transactions and move money around under money launderers’ direction.

• Money launderers find hiring youngsters looking to make a quick buck as money mules. A Barclays Bank report states that every 2 in 5 money mules are aged under 25 years old.

• The same report also states that student money mules increased by 23% from the start of the 2023 academic year to October 2023. The financial industry must incorporate stricter safety measures to tackle money and willing money mules.

7. FaaS is rising, giving hackers more ways to commit fraud

Conventionally, a criminal had to learn cybersecurity basics, how to use sophisticated tools, and technical know-how to carry out fraud. However, these days, people can find Fraud-as-a-Service (FaaS) software and use it for financial gain through fraud. Here are a few key insights:

• FaaS is ‌a type of Crime-as-a-Service (CaaS) tool that allows non-technical users to engage in fraudulent activities.

• FaaS is a growing threat, including fraudsters selling their tools, services, or expertise for money.

• This means that people who previously could not commit fraud can now purchase a tool or hire services to fulfill their fraud schemes.

Take advantage of HyperVerge’s advanced fraud prevention solutions

Fraud is an ever-growing threat, and mitigating fraud is more essential for businesses than ever. The future of fighting fraud consists of utilizing generative AI and machine learning.

HyperVerge’s fraud detection API offers comprehensive fraud detection with signature/thumbprint analysis, photo-on-photo verification, ongoing tampering monitoring, and screen capture/photodetection. Hyperverge ONE’s robust AI solutions have onboarded over 750 million users and have a 95% auto-approval rate.

Top companies like LinkedIn, SBI, Zomato, CRED, and Tata Capital use HyperVerge’s solutions. It offers a dedicated customer support system for seamless integrations and has garnered a respectable 4.7 stars out of 5 in G2 ratings and reviews.

Utilize a comprehensive fraud detection and prevention solution with proactive measures to help detect fraud in real-time. 

Having a professional third-party solution for fraud management helps businesses with proficiency and scalability, which leads to fraud reduction, reduced fraud losses, enhanced customer experience, and increased customer retention.

Build an end-to-end custom solution with HyperVerge that caters to your business with features such as: 

• Automated fallback options
• Analytics on conversion rates
• Configurable user onboarding workflows and UI/UX without code

Frequently asked questions on fraud trends

1. What is fraud trend analysis?

Fraud trend analytics uses big data analysis techniques to prevent fraud. It can help financial organizations predict future fraudulent behavior and apply fast detection and mitigation of fraudulent activities through human intervention in real time.

2. Will fraud management become difficult with time?

Yes and no. The answer is surely complex. With fraud methods constantly evolving, mitigating fraud attacks on your business can be complicated. Conversely, fraud prevention tools and solutions evolve with top fraud trends in mind and provide effective solutions for your business without hindering customer experience.

3. Which industries are vulnerable to fraud?

Fraud attacks can occur in all kinds of business sectors. Still, banking, eCommerce, health, insurance, gaming, and other industries involved in online transactions are at higher risk.

4. How can AI effectively detect and prevent fraud?

A powerful AI model can analyze data streams of previous fraud techniques at a very high speed and monitor transactions in real-time to detect anomalies or red flags, thereby detecting potential fraud.