South Africa

South Africa: Online fraud soars in financial services sector

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AS CONSUMERS increasingly bank and conduct other financial transactions online, new research from TransUnion has found that fraudsters are ramping-up their activities in the financial services sector.

According to research by the information and insights provider, suspected digital fraud attempts in South Africa related to financial services increased by 187 percent in the first four months of this year compared with the last four months of 2020. Globally, the rate of financial services fraud attempts increased by 149 percent.

Across industries, the rate of suspected digital fraud attempts globally rose 24 percent when comparing the first four months of 2021 with the last four months of 2020. In South Africa, the overall percentage of fraud attempts increased by 7 percent during the same time period.

Shai Cohen, the senior vice-president of Global Fraud Solutions at TransUnion, said on Friday the rate of fraud attempts was peaking globally, particularly in the financial services sector, because fraudsters understood this was where the most high-value transactions were taking place.

“We are seeing more financial services organisations implement fraud prevention solutions with some success, though our findings make it clear that this is not the time to relax. As the economy begins to open up and perform better, businesses need to do even better to ensure they are providing a secure marketplace that offers friction-right experiences to consumers,” said Cohen.

TransUnion monitors digital fraud attempts reported by businesses in industries such as financial services, health care, insurance, retail, telecommunications and gambling. The conclusions of the research were based on intelligence from billions of transactions and more than 40 000 websites and apps contained in its identity-proofing, risk-based authentication and fraud analytics solution suite, TransUnion TruValidate.

A secure marketplace was important as Covid-19 accelerated the shift to digital financial transactions.

In late September last year, 40 percent of consumers with a financial account said in a TransUnion commissioned survey that they were using digital platforms more frequently since the onset of the pandemic. The same survey found that 60 percent of consumers said most of their financial transactions were conducted via mobile applications.

TransUnion defined identity theft, the main type of digital fraud in financial services, as the use of a stolen identity to commit fraud where the victim was a real person.

The second and third most reported types of digital fraud by TransUnion financial services customers were firstparty application fraud and account takeover, respectively.

First-party application fraud is when a consumer refuses to repay legitimately incurred debts and/or falsely claims to be a victim of identity fraud to evade debt.

Account takeover is when someone other than the owner of an account uses the account without permission, indicating that the account has been maliciously compromised.

Keith Wardell, a product director at TransUnion Africa, said an interesting dynamic was playing out where TransUnion was seeing other industries facing far fewer suspected fraud attempts than what has been observed in the financial services sector.

 

 

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