Payment fraud was at an all-time high in 2022, as hackers and scammers took advantage of increasingly sophisticated techniques to access and exploit payment networks. Let’s look at some of the lessons to be learned from the global payment fraud trends of 2022.
What were the most prominent 2022 Global Payment Fraud Trends?
1. Application Fraud and the Use of Synthetic Identities
When I asked Ali Solehdin, the Chief Product & Strategy Officer at INETCO Systems, what stood out for him in the payment frauds he saw in 2022, without hesitation, he cited synthetic identity fraud. “Synthetic identities are being used more than ever in payment fraud. This type of fraud is becoming increasingly prevalent, as criminals have found easier ways to anonymously create false identities and use them to apply for credit and other financial services.”
To conduct their schemes, criminals attempt to open as many accounts as possible so they can extract the most money in the least time. These synthetic identity fraud attacks require them to have the capacity to automate the creation of significant numbers of fabricated consumer identities before the attack is detected. When making their synthetic identities, they can easily make slight adjustments to a name, address, or any other feature.
2. The Continued Growth of Bots
“The dawn of bots has risen,” says Ugan Naidoo, INETCO’s Chief Technology Officer, “With an increased use of bots and automation in various sectors, they have become an integral part of everyday life.” As a result, their ability to perform mundane tasks quickly and efficiently is becoming increasingly popular in various industries. “Though convenient, there is always a darker side to tools like these, something that fraudsters and criminals take full advantage of,” Ugan told me in our interview. “Fraudsters can automate large-scale sophisticated attacks. They create network distractions using cyberattack vectors such as DDoS attacks, pulling resources and attention away from one part of your network. While you are distracted, they attack another part of your network.”
These bait-and-switch attacks show that fraud prevention teams need the right tools to detect, report, and prevent these tactics effectively.
3. The Strength of BIN Attacks Using Brute Force
With the transition to digital payments, brute force attack trends have also risen in the past year. Additionally, we have seen a rise in bot assaults because they are simple, affordable, and effective.
Though fraudsters still use devices like gas station card and ATM skimmers, with advanced technology, such as emulators, auto clickers, and app cloners, it is easier than ever for them to carry out BIN attacks with increased velocity and on a bigger scale. Criminals don’t even need to be physically present at the target since they can launch these attacks remotely without leaving their couches.
4. Authorized Push Payment Fraud – The Need to Connect with Customers Quickly About Fraud
While it is essential to identify potentially fraudulent activity quickly, it is equally critical to have effective customer communication processes in place. As new threat vectors evolve, businesses need to ensure their customers have the most up-to-date information about current threats. Authorized push payment fraud, where customers are tricked into sending money to a fraudster, was one of the fastest-growing payment frauds last year. In some regions, it accounted for 75% of all digital bank frauds.
Keeping customers educated about scams is the first line of defense against many types of fraud. Implementing a two-way customer communication strategy into your fraud workflow can help protect your customers from payment fraud, reduce overall losses, and avoid PR nightmares like the one Canadian bank is currently experiencing. Courts there recently reinstated a lawsuit for someone who was scammed. The plaintiff claims that the bank had an obligation to tell her about a fraud threat that was previously reported in the area before permitting her to transfer $69,000 abroad. This example shows just how damaging to individuals authorized push payment fraud is and how easily, without the proper communication and training, fraudsters can take action. Here we saw there is not only a financial loss but also a public reputational loss for the institution. To protect against APP fraud in 2022, organizations must educate their customers on how to recognize it and protect themselves when it occurs.
5. Convergence – The Fusion of Cybercrime and Payment Fraud
The convergence of fraud and financial crime departments has been a significant subject of discussion in recent years. “Although some financial institutions have created fusion centers, in most, the fraud and cybersecurity departments work in silos. For example, fraud is not a concern for many CISOs, because a stolen credit card is not a security issue. Conversely, few fraud prevention managers concern themselves with the intricacies of network cyberattack,” says Ugan. This can create a landscape that criminals exploit more easily by conducting the digital bait-and-switch described above in section 2 regarding bots.
“Supporting the abilities of cybersecurity and fraud departments to share rich data and discern patterns in real-time will be critical,” adds Ali. “From now on, increasing the visibility between departments and reducing the time it takes for them to act will be a driving force in reducing losses.” In addition, a unified approach helps thwart criminals who exploit the vulnerabilities that result from this lack of alignment.
The Ever-Evolving Nature of Payment Fraud Trends
Fraudsters continue to grow their techniques to bypass security measures; with new technology becoming more sophisticated and creating new avenues for attacks, the financial industry cannot rely on its existing tools and must evolve with the criminals. Cybersecurity and fraud prevention teams need to regularly evaluate new technologies. “However,” Ugan noted, “business owners must first understand the threat landscape to improve payment network security. This means taking a step back and gaining an overview of the attack vectors used by criminals that cause disruption and financial losses.” Finishing our talk, Ugan said that “business owners need to audit which assets and systems attackers will likely target, implement better defenses, and reduce attack routes into their systems.
Take Action Now to Curb and Diminish Fraudulent Activity
By leveraging the latest technologies, such as machine learning, user and entity behavioral analytics, and real-time transactional data, businesses can create a robust payment network protection strategy that safeguards their customers and bottom lines from sophisticated fraud and cyberattacks. The need for the right tools is why INETCO BullzAI (BullzAI) should be the next technology you look at to enhance your payment fraud prevention strategy.
Boasting a robust and data-rich fraud monitoring and prevention tool powered by both supervised and unsupervised machine learning, BullzAI proactively empowers financial institutions to fight multiple threat vectors. One solution can detect and block payment fraud attacks, insider fraud, and advanced persistent threats and cyberattacks. In addition, BullzAI provides precise fraud risk assessment using data collected at the most granular level, enabling financial institutions to take swift action to prevent fraud. As a result, card issuers, acquirers, and merchants can achieve more accurate fraud detection and fewer false positives.
Unlike some fraud solutions, BullzAI detects anomalous transactions and malicious activities before they reach the authorization host. Using supervised and unsupervised machine learning, BullzAI ensures infrastructure protection on multiple OSI levels by detecting and blocking cyberattacks that can bypass existing web application firewalls and other defenses. In addition, BullzAI integrates seamlessly with existing systems, providing an additional layer of security and covering parts of the threat landscape that other methods simply cannot.
How prepared are you to combat threats in 2023? Watch our on-demand webinar replay with Ali Solehdin, INETCO’s Chief Product and Strategy Officer, where he shares valuable insights into some of the threats posed by financial criminals in 2023, and tips on how to mitigate them.