Feedzai, the world’s first RiskOps platform for financial risk management, has released its latest report - The Human Impact of Fraud and Financial Crime on Customer Trust in Banks.
The report, based on research of 4,000 consumers in the UK and US, reveals how fraudsters are taking advantage of the widening fraud knowledge gap, outlining the urgent need for banks to educate and protect their customers with technology.
Report findings
The report reveals that while over half (56%) of respondents have been a victim of a financial scam, many still lack the knowledge to detect and distinguish between the various types of financial crime.
Consequently, many consumers believe the responsibility for reimbursement lies with their bank, with over half (53%) believing they should be reimbursed if they fall victim to a scam or third-party fraud. If they weren’t refunded, three-quarters (77%) of respondents across the UK and US indicated they would leave their bank.
Romance tops the list but fraudsters are adapting
Fraudsters have targeted emotionally vulnerable people, with 13% losing more than $8,400
Romance scams top the list as the most reported type of scam, with a third (36%) of respondents having either been personally scammed or knowing someone who has been a victim.
Arguably one of the cruelest forms of consumer-facing fraud, fraudsters have targeted emotionally vulnerable people, with 13% of those scammed by fraudsters losing more than $8,400, causing significant distress.
However, Feedzai’s research found that romance scams are just one component of financial crime. Money mules, individuals whose bank accounts are used by fraudsters to transfer money, are becoming an increasingly prominent aspect of cybercriminals' economic business models too.
Social media is the preferred platform
In the US particularly, fraudsters are targeting unwitting consumers to become money mules. Nearly half of US consumers have been approached to receive funds, yet a quarter (24%) are unaware of the risks of being a money mule.
In the UK, only a third (35%) of respondents had been approached to receive funds and seem more risk-aware, with only 17% unaware of the risks associated with being a money mule. Social media is the preferred platform for fraudsters with 42% of respondents approaching social media to become money mules.
AI drives reassurance but banks need to get it right
As criminals get more aggressive and innovative, emerging technologies such as ChatGPT create a new set of challenges for banks and financial institutions in tackling financial crime.
In response, banks must act and also embrace innovative technology to protect their customers from fraudsters. AI holds huge potential to keep customers safe, whilst also solidifying customer loyalty, with over half (53%) of respondents feeling safer knowing their bank uses AI to protect them.
Need for accuracy and transparency
The report highlights the need for banks to prioritise effective safeguards and tailored strategies
However, the need for accuracy when using AI is vital with 46% of respondents considering leaving their bank if it stopped a legitimate transaction, even if the issue was resolved quickly.
The report highlights the critical need for banks to prioritise transparency, effective safeguards, and tailored communication strategies to ensure customer loyalty and satisfaction.
Need for public awareness and education
Pedro Barata, Chief Product Officer, Feedzai commented, “Our latest report highlights a major issue in terms of public awareness and education surrounding the distinctions between various types of financial crimes."
Pedro Barata adds, “With a surge in digital banking services, a willingness among customers to switch banks, and an ongoing cost of living crisis, it is more important than ever for banks to foster strong relationships with their customers and establish trust. The potential of AI and other advanced technologies to enhance security measures and better protect customers from these threats has never been more clear.”