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Fraud skyrockets as instant cashless payments take hold

Source: Nice Actimize

NICE Actimize, a NICE (NASDAQ: NICE) business, has released "The 2023 NICE Actimize Fraud Insights Report" that delves deeply into the banking and payments landscape and uncovers the most pressing threats and patterns impacting financial institutions.

Leveraging NICE Actimize’s X-Sight AI, which utilizes collective intelligence and Federated Learning to spot emerging threats and suspicious patterns of activity, the report was created by analysing billions of banking and payments transactions representing over $110 trillion in value.

NICE Actimize’s in-depth research showed that the rise of banking fraud is a growing concern for Financial Institutions (FIs) and consumers alike. Fraudsters are becoming increasingly sophisticated, shifting their tactics from traditional account takeover and unauthorised fraud to more complex authorised payments fraud (scams). This not only complicates the fraud threat landscape, but also puts FIs at risk of double loss scenarios - both first-party and third-party victims.

The report indicated that from 2021 to 2022, attempted fraud transactions skyrocketed by 92% and attempted fraud amounts have soared by 146%. This alarming trend highlights two key points: first, there is a dramatic increase in overall transaction volumes and second, fraudsters are becoming bolder and targeting higher fraud amounts. The report also stated that fraud is not limited to one specific channel; it’s a complex, multi-channel threat that is shaped by digital transformation, changing consumer behaviours and shifting fraud patterns. The report also estimated that the absolute amount of Attempted Authorized Payments Fraud overtook Account Takeover Fraud amounts with a 45.9% year-over-year increase from 2021 to 2022.

“Fraudsters are leveraging faster payments innovation to conduct sophisticated scams involving money mules who transfer funds away from the FI—funds that are often unrecoverable,” said Craig Costigan, CEO, NICE Actimize, “As the digital landscape evolves, so do fraudsters’ tactics. The threats identified in our report are a glaring reminder of the ever-present risk that looms over digital channels and payments. Financial institutions must fortify their defenses, and review digital channel controls, to stay ahead of new and emerging threats.”

As the world moves towards a cashless society, the volume of transactions is increasing, and so too is the amount of fraud across all channels and typologies, including online, mobile, and in-person transactions. NICE Actimize's research sheds light on this pressing issue and highlights the need for layering in cutting-edge technologies like Machine Learning (ML) and Artificial Intelligence (AI) to identify even the most sophisticated fraud schemes.

The report also indicated the Money Mule-related fraud is a leading challenge facing financial institutions. Money Mules are a key element in authorised payments fraud and scams, new account fraud, and in moving illicitly obtained funds. The report explains that while mules don’t generate direct loss at an FI, they do impact revenue because these accounts aren’t profitable, are costly to acquire and maintain, and expose FIs to regulatory scrutiny and reputational damage.

The NICE Actimize Fraud Insights Report’s data showed that:

59% of new account fraud is mule related, and the majority of these accounts demonstrate mule characteristics within 30 days, indicating that fraud is being conducted almost instantly.
Money is typically moved in a mule network within two hours before its completely gone, exiting the account within 12 hours.
Using anonymised data, insights for this report were secured across online and offline payments channels, including P2P, ACH, wires, checks, and card transactions.

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