Shattered Trust: The Cost of Digital Fraud in 2024

With our digital world expanding rapidly, and the tools to commit fraud readily accessible, fraudsters have a vast playground to exploit. Although anti-fraud experts are using cutting-edge technology, criminals have the advantage of launching massive attacks without the need to play by any rules. It's a relentless battle, but awareness and industry collaboration toward more effective fraud prevention are our strongest weapons. 

A look at the past five years shows an ominous trend.

From 2019 to 2023, we noted:

• A 90% jump in digital transactions
• A 105% spike in suspected digital fraud
• Suspected digital fraud growth outpaced digital transaction growth by 17% 

From 2022 to 2023, we noted:

• A 6% bump in digital transactions
• A 14% rise in suspected digital fraud
• Suspected digital fraud growth outpaced digital transaction growth by 133%

The past five years, marked by the COVID-19 pandemic and rise of AI, have seen the digital landscape shift dramatically. This period witnessed a swell in digital transactions, which became prime targets for fraudsters.

Before 2019, the online world was relatively stable. However, the pandemic accelerated the adoption of digital technologies, leading to significant increases in the volume and complexity of digital transactions.

AI and related technologies have become a cornerstone of the battle between legitimate businesses and fraudsters. Those seeking to protect their interests have invested heavily in AI-driven cyber fraud risk mitigation solutions — while criminals have also adopted the same technologies to enhance their capabilities. This ongoing showdown has intensified the challenges faced by online businesses.

Fraudsters are constantly evolving their tactics and trying new things. While there are many types of online fraud, five categories account for over a third of all cases:

1. Account takeover (ATO): Fraudsters gain control of accounts using stolen credentials, social engineering or other methods
2. Credit card fraud: Misuse of credit or debit card information
3. True identity theft: Using stolen personal information to commit various crimes
4.  Automated Clearing House (ACH)/debit fraud: Unauthorised transfers of funds from bank accounts
5. Synthetic identity fraud: Creating fake identities using real and fabricated information

These frauds often serve as stepping stones to other criminal activities — which speaks to the interconnected nature of online crime.

Digital onboarding, while designed to streamline the verification process, has become a battleground between legitimate businesses and fraudsters, with genuine customers caught in the crossfire. While it offers efficiency and convenience, it also presents new vulnerabilities.

Once a novelty, deepfakes have become a serious threat to digital onboarding. Their prevalence has surged as costs plummeted from $300–$20,000 per minute in 2023 to $100 per minute today due to subscription-based offerings. This accessibility has empowered fraudsters to launch sophisticated attacks at scale.

Key statistics:

• Deepfake growth: Deepfake scams in Hong Kong skyrocketed 1,000% in the first quarter of 2024 compared to Q1 2023. This increase was one of the highest in the APAC region, trailing only behind China (2,800%) and Singapore (1,100%)
• Fraudulent transactions: 5.7% of all attempted digital transactions where the consumer was in Hong Kong were suspected to be digital fraud in the first half of 2024

To combat these threats, financial institutions must consider more than deepfakes and focus on the four pillars of identity:

1. Person: Is the individual who they claim to be? Are their provided details consistent with their claimed identity? Are there any signs of compromised personal information or suspicious device activity? Is a ‘selfie’ (required to be taken by the client) linked to another identity or Social Security number?
2. Accounts: How many accounts does the customer have? At which institutions are these accounts located? What’s their credit activity history? Have any accounts been flagged for suspicious activity? Has the customer opened several similar accounts within a short time span?
3. Transactions: Do the customer's behaviours align with expected good customer behaviour or unpredictable patterns associated with fraudulent behaviour? Are there any unusual patterns or high-risk activities? Have any of their accounts, or their identity or device been blocked by other parties?

Devices: What devices are being used to access the customer's accounts? Have any of these devices been linked to fraud previously? Are there signs of device tampering or the use of VPNs or proxies to mask their location?

Businesses must move from a siloed approach to identity to a more well-rounded strategy. These four pillars should be considered in conjunction with each other so businesses can gain a more thorough understanding of a customer's authenticity and identify potential red flags. This approach is essential in the ongoing battle against fraud.

The financial services industry is under relentless attack by fraudsters and money launderers. With annual money laundering volumes ranging from 2% to 5% of global GDP, it’s critical businesses learn how to protect themselves and stay compliant with anti-money laundering and fraud regulations. 

With $1.2 billion in fraud losses for mobile casinos and betting platforms worldwide between 2022 and 2023 alone, the gaming industry is facing a crisis. With fraud rates skyrocketing 64% from 2022 to 2024, gaming companies must be proactive in identifying and combating emerging fraud risks to protect their operations and customers. 

With more cell phones on the planet than people, these devices have become central to our lives, offering a gateway for fraudsters to target both users and telecom providers. To meet this growing threat head-on, urgent action is needed, as well as the alignment of global telco fraud prevention strategies with future-proof fraud tools.  

FinTechs are booming in emerging markets like Africa, Asia and Latin America, bringing financial inclusion to millions. But with this growth comes a surge in fraud: A whopping 80% of fraud cases in Africa involve fake IDs. While biometric identification helps, fraudsters are quickly adapting. FinTechs need a 360-degree view of identity to tackle evolving threats.

Combatting fraud is a constant struggle as criminals keep changing their tactics. To stay ahead, businesses need strong identity checks, smart technology, access to multiple unique identity datasets and reliable fraud protection. A major asset is shared fraud data across industries. This pool of information on past and present fraud provides valuable clues about how criminals work. By analysing this data with powerful AI, it becomes possible to better understand how customers behave and spot potential anomalies.

• Global fraud consortium networks can be very beneficial. Businesses from different industries partnering to share information and fight fraud presents a powerful front.
• Industry collaboration for fraud prevention is key. By working together, businesses can share best practices and identify trends that might be missed when working alone.
• Shared fraud data across industries is essential. Different sectors help identify broader patterns and trends. Real-time fraud feedback data can identify fraud networks quickly, minimising potential losses.
• Collaborative fraud detection strategies are crucial. Groups of businesses can better identify and stop fraud using advanced analytics, data mining and artificial intelligence.

Don't let fraud harm your business. Partner with TransUnion to fortify your stance and build trust. Protect your customers and strengthen your reputation with robust identity verification and fraud detection solutions.