The onset of the COVID epidemic in early 2020 necessitated major adjustments in the global economy. Meanwhile, digital technology in the banking and financial sector has made its operations much easier than ever. In fact, mobile banking in the United States increased by 50% in the first half of 2020. Furthermore, another report quoted that more than 8 in 10 Indians with a bank account in metro cities use mobile banking apps amid the pandemic.
Although consumers have welcomed the convenience of digital payments and banking services, there has clearly been an increase in digital banking fraud also. Because of the rapid acceptance of digital payments around the world, fraudsters have found a variety of methods to affect the banking industry. Fraudsters have access to cutting-edge technology and in recent years, they have been more effective in exploiting digital channels. It is thus necessary to identify and tackle the growth of digital banking fraud to not only safeguard the consumers but also to strengthen financial institutions as a whole.
Internet Banking Fraud
Internet banking fraud includes any attempt to steal money fraudulently from one bank account to another. population around the world are using internet banking services for making online purchases, transferring money, and paying bills. And fraudsters will always find their way to steal money from where it is stored. Financial institutions are increasingly subjected to a variety of cyber threats, such as phishing, card skimming, identity theft, spyware, site cloning, and so on.
Moreover, consumers have now shifted to mobile devices for all banking operations. And there is always a risk of mobile ad fraud that can infect mobile phones. Furthermore, there are gaming apps that can inject malware and can go unnoticed at times. Fraudsters have also targeted recent innovative banking services, such as mobile wallets. Anyone could easily fall into the hands of cybercriminals due to simple ignorance or carelessness. All of this increases the risk of digital banking fraud, necessitating the development of security measures.
Dangers of Digital Banking Fraud
With advanced technology in their arsenal, fraudsters are taking advantage of the digital channels to exploit their regular behaviour. There is an increased risk of financial information being compromised. Right after the peak of the COVID pandemic, institutions reported a nearly 35 percent increase in fraud attempts. Meanwhile, global identity fraud losses recorded $56 billion, affecting financial institutions, enterprises, and consumers.
The techniques for committing digital banking fraud are becoming increasingly sophisticated and are thus surpassing the tools designed to detect their malicious actions. With advanced technologies, fraudsters are continuously upgrading their methods to evade prevention measures. Phishing, identity fraud, as well as the variety of digital payment options, are continuously assisting bad guys in their objectives.
Even though security concerns have developed drastically over the years, fraudsters and bad actors are still a curve ahead of the banking security procedures. The risk is further elevated by external factors such as new technologies, greater consumer use of mobile apps, international data exchanges, and use of third-party data, among other things. More importantly, it is the uninformed and uneducated customers who are mostly targeted by scammers. They frequently threaten consumers' financial insecurity in order to deceive them. Additionally, banks and other financial institutions need to consistently improve consumer awareness of secure online transaction practices.
Digital Banking Fraud not only costs businesses losses in monetary terms, but it can also inflict reputational damage to banking institutions. There is a greater risk when clients lose trust in their financial institutions when they are faced with fraud. To prevent these consequences, banks must strengthen their security solutions and also educate their clients about how innovative technology keeps their payments and accounts secure.
Securing the digital banking ecosystem
Banking institutions require a broader range of digital data and a hybrid, multilayered approach in order to effectively fight this problem. Given this risk, financial institutions must maintain strong security positions. It is high time that banks invest in cutting-edge digital solutions to meet consumers' security and privacy concerns.
Further, it is equally important to educate customers on how to secure their accounts, since it is them at the forefront of digital fraud. Without a doubt, user negligence or lack of understanding is another reason for fraud. In today's changing world, consumers have high expectations of their financial institutions, and security is a critical element of their concerns. Institutions must leverage consumers' growing interest in digital banking right now, and they must stick to the following suggestions to remain competitive.
Banks must reinforce their security posture by using high-quality security measures that assist limit the frequency and severity of data breaches. It is a must to invest in a broad range of anti-fraud security measures to win the war against bad actors. A security portfolio based on trustworthy identities, data, and payments will ensure their sustainability in these alarming times.
Additionally, educating clients and customers is highly important. While customers do not need to understand the intricacies of the security technology, they need to be assured of how institution secures their accounts. Many are aware of basic security features such as username and password, two-factor authentication, and fingerprint recognition, but consumers likely need more education on advanced features such as biometric authentication methods.
Furthermore, they must also be guided on precautions necessary to avoid any attempt of digital banking fraud. For instance, it is advisable not to install any suspicious application without first confirming its intended use and potential consequences. Also, avoid using public networks or unsecured wifi for doing digital transactions. Another important tip is never to reveal your PIN to anyone.
The financial services business is undergoing a massive digital transformation. It is highly important to detect and prevent banking fraud. Fraud protection techniques must evolve as consumers rely more on digital platforms for financial services. Banks need to build and serve their customers with a strong and user-friendly fraud protection system. This would simply require a new approach to fraud detection that uses machine learning and data analytics to reduce risks and hence can be the right strategy.