Month: December 2023

Categories
Fraud

Hyper-Personalization for Fraud Prevention

Hyper-Personalization in Fraud Management

Hyper personalization is a game changer for businesses looking to improve customer lifecycle and fraud management. 7 out of 10 consumers expect a personalized experience from businesses. But, the current personalization methods are full of gaps.

Businesses that use digital marketing to acquire and serve customers are the ones moving towards hyper-personalization. Hyper-personalization is a supercharged version of personalization that uses real-time customer data, AI, automation & predictive behavior analysis. The results are different for companies that use real-time personalized customer experiences.

Several banks, financial institutions, and other finance businesses are also looking to step up their personalization program. 

If done right, hyper-personalization is the key to fraud management and fraud prevention. Hyper-personalization has the power to transform the consumer’s experience of fraud controls. As it uses a data-centric approach, banks, and other businesses will be able to implement strong fraud controls across the customer journey.

This is essential as fraudsters have become a part of every single customer-business touchpoint. There are thousands of ‘moments’ in a customer journey where a decision will be able to figure out whether a fraud, a scam, or a legitimate activity is taking place.

Using Data To Take Right Decisions

Whenever businesses come across an event that can be fraud, several decisions can be made to determine whether the activity is legitimate or fraudulent. The series of decisions can be:

  • Is it a new device?
  • Is an OTP needed?
  • Is there a risk of a SIM swap?
  • Is a biometric check needed?
  • Is the customer moving money using a unique channel?

To find answers about these decisions, there are multiple datasets about the customer, their accounts, their email, their mobile, their biometrics, etc. To deliver a hyper-personalized experience, the right data and insight must be delivered to the right decision, at the right time to enhance the customer experience.

Current fraud prevention methods tend to focus only on the negative indicators from the database and these negative indicators point towards a potential fraud or scam event.

Getting Rid of Functional Silos

For businesses to achieve hyper-personalization, the context needs to be available across all points through the customer journey. Fraud solutions with banks and financial services are too often deployed in isolation from other touch points in the customer journey. While the fraud prevention journey should be a part of the entire customer journey, the current methods are separate.

The decisions that need to be made and the treatment paths that are taken should be interlinked and consistent throughout the customer journey.

This will better inform the next best decision, whether it is about declining or holding payment, and how they communicate with the customers often.

Make Your Customer a Part of the Fraud Department

Customers play the biggest role in the fraud prevention process. Having clear & consistent communication is a crucial element for this hyper-personalization to work. 

With the rise of communication channels, more and more customers have received a communication that they believe was a scam. Traditional strategies such as post-transaction verification checks delivered via message is delivered through SMS are usually ineffective.

During a scam, the person initiating the transaction is a legit customer, and a simple “Is this you?” can only met with an affirmation. There’s no option to highlight if the legit user is under the control of a fraudster who may be telling them to ignore such messages.

Every bank and financial institution should have ‘moments’ of intervention where a customer has the opportunity to change a customer’s course of action. The channel, clear messaging, and the timing of the intervention have to be right. 

According to data, customers respond better to a series of timely conversational messages that are clear and relevant, instead of a single ‘Yes or No’ text. 

By delivering the right message at the right time, through the right channel, hyper-personalization will help organizations get rid of noise and deliver customers exactly what they need.

Categories
Fraud

5 Types of Subscription Fraud

subscription frauds

Subscription fraud is one of the least common types of fraud faced by communications service providers. Even if the problem is small, it has a huge impact. The problem has grown by nearly 6% from $1.92B to $2.03 billion.

In this guide, we’ll outline the 5 most common types of subscription fraud that communications businesses face.

What is Subscription Fraud?

Subscription fraud can be a symptom of a gateway to other frauds. For example, fraudsters can create a synthetic identity to create a fraudulent subscription. This also helps fraudsters build a fake identity associated with a phone number.

These identities are then used to defraud banks, financial institutions, and other entities.

Apart from this, subscription fraud also continues in traditional ways, such as people who subscribe but don’t intend to pay. Or a type of fraud that seeks to acquire incentivized devices falsely just to sell them online.

Types of Subscription Fraud That Communications Businesses Face

1. Fraud Shown as Bad Debt

There is a type of fraud where fraudsters show themselves as bad debtors. More than 40% of the experts CFCA surveyed say less than 10% of the bad debt is actually due to fraud.

However, whether the Communications service providers have a way to differentiate between bad debts from scams may challenge this statistic. 

If a fraud is categorized as bad debt, it won’t be investigated or stopped. This means scammers can return over and over again to different service providers with different types of frauds with little concern of being caught.

2. Fraudsters Hide Among False Positives

Fraudsters take advantage of the fact that CSPs don’t share fraud data among themselves. While the financial industry has started sharing liability data to prevent a single fraudster from tricking the system again and again, CSPs are yet to do that.

No company wants to share insider information with its competitors, but to prevent fraud, collaboration is essential.

While Communication Service Providers have managed to reduce the number of false positives, others are struggling. According to reports, fraud management systems tend to detect fraud with an average false positive rate of either 13% or 88%.

26% of the fraud management systems spend an average of 20 hours per week on researching false positives. What makes things even worse is that around 52% report using no third-party data to help gain insights required to differentiate between real fraud from false positives.

3. IoT Based Subscription Scams

The risk of fraud in the Internet of Things (IoT) is clear from CFCA’s survey. Only 41% of service providers are actively checking for fraudulent activity in IoT data. The survey reveals that Distributed Denial of Service (DDoS) attacks, misuse of unlimited data services, and SIM swaps are the most common methods used for IoT-related fraud. This indicates that criminals have a relatively easy time exploiting the growing IoT landscape, as it lacks adequate defenses. This vulnerability can lead to serious crimes, such as using SIM swaps to gain control of personal bank accounts.

4. Back-Office Inefficiency-Based Subscription Fraud

Inefficiencies in the back-office and the use of isolated systems are causing an increase in fraud losses. Various departments, such as sales and marketing, credit risk, fraud, and collections, often operate on separate systems. 

Although each department collects valuable information, they rarely share this data. This presents two problems for fraud teams: they may make poorly informed fraud decisions, and they might create inconvenience for customers by requesting information that another department in the organization already has.

Fraud teams are also taking on broader responsibilities. According to CFCA, 39% of fraud teams now handle customer service tasks, and 20% are involved in sales and marketing. This expanded role for fraud managers becomes challenging when they have limited access to information due to siloed systems.

This issue is exacerbated when different departments have conflicting goals, as is often the case for sales and fraud management. Salespeople are motivated to close deals, while fraud departments aim to prevent fraudsters from exploiting the sales process and marketing incentives to steal subscriptions and devices. 

Since it’s impractical to turn salespeople into fraud experts, it’s crucial to implement built-in real-time fraud controls in the sales process to maintain a balance between maximizing sales and minimizing fraud.

5. Streaming-Focused Subscription Fraud

For many years, Communication Service Providers (CSPs) worldwide have been striving to offer a variety of services, moving beyond traditional communications to focus on broadband and content. However, the landscape of content consumption has evolved, with streaming becoming the preferred method for accessing video content.

Major streaming services, with Netflix being a prominent example, have often turned a blind eye to customers sharing passwords with non-subscribers. This leniency was understandable during the phase of acquiring customers and building brand awareness. However, as these markets mature and approach saturation, the focus shifts to revenue assurance, highlighting the issue of subscription fraud.

While being lax about password sharing may have made sense in the early stages, it can now pose a barrier to revenue growth. This shift in attitude toward password sharing can have negative repercussions on stock prices and valuations, especially when streaming services fall short of their subscriber addition targets.

Categories
Bank

Common Bank Account Data Errors and Solution

bank account data error

Bank account errors can be costly for both the institute and the customers. Financial institutions, banks, and other businesses must ensure that all accounts and reference numbers are formatted correctly before any payments happen.

Bank account errors happen when there are any issues with this information. Sometimes they happen because financial institutes and banks fail to comply with compliance standards. The most common one is the BACS requirement, to ensure the bank account details exist and are associated with the payee.

To make sure payments happen without any errors, there have to be no mistakes in the input data. Even the smallest error in a bank account number can lead to payment failures, wrong transactions, and more.

Fortunately, banks, financial institutions, and businesses can significantly reduce the amount of banking errors with a series of checks.

In this blog, we’ll be going over the root causes of transaction errors, and how businesses can take the first steps toward reducing them.

What Are Bank Account Errors and What Causes Them?

Businesses that want to minimize bank account errors need to understand what type of errors are mostly impacting payments, and how commonly they happen.

Here are the most common bank account errors, this allows businesses to investigate the root causes of failed transactions.

Businesses that want to minimize bank account errors need to understand what type of errors are mostly impacting payments, and how commonly they happen.

Here are the most common bank account errors, this allows businesses to investigate the root causes of failed transactions.

1. Account number & sort code errors

Errors such as invalid bank account numbers or sort codes typically happen when customers mis-enter data into payment systems or company forms. This also happens when customer reps mis-hear or mis-key account information.

One of the most common reasons for this type of error code is if data is being migrated or copied between systems, especially if teams have to manually enter information.

These kinds of mistakes have serious consequences, ranging from failed transactions to misdirection of funds. Both of which lead to financial losses for both the consumers and organizations.

2. Reference number errors

There are some cases where the bank account number and sort code are correct, but the reference number (supplier number or invoice number) is wrong. In these cases, payments may be suspended pending investigation by the payment provider.

As an additional challenge, the failed transaction may not be marked to the person or organization making the payment. On the other end of the failed transaction, the recipient will not receive the funds.

3. Changes that Result in Invalid Bank Codes

The financial industry is prone to changing regulations. Sudden changes such as bank mergers, acquisitions, or restructuring can result in changes to the bank’s routing numbers.

When these changes happen, customers need to make sure that the latest details are used for all payments and transactions. The direct debits and other automated payments and deposits and other information are updated with their new details.

This is essential in ensuring that transactions can be verified correctly and there’s a low risk of failed transactions and misdirected funds.

How do Bank Account Errors Impact Businesses?

Common bank errors can have serious consequences for both businesses and consumers.

As bank errors that result in failed transactions require additional investigations are also time and costly. Moreover, these kinds of incidents lead to poor customer experience and poor brand reputation. A lot of businesses have also found out that failed transactions are directly related to a high rate of customer churn.

For consumers, failed transactions and misdirected funds can also be super frustrating. Customers are left waiting for funds for a long time, the consequences can be even more severe, preventing the use of the funds for essential items and bills.

How are Bank Errors Usually Handled?

Every organization across the globe handles bank account errors differently. In the US, for example, invalid accounts with no corresponding account lead to a transaction being rejected instantly.

In Europe, payment providers try to resolve the transaction, generally without informing the payee. This can help fix the problem in the short term, but it can result in serious consequences if funds are misdirected.

These mistakes can come to light over time, causing long-standing resolution challenges and major inconvenience for consumers.

How Bank Accounts Minimize Bank Account Errors?

There are different ways to minimize bank account errors. Let’s go over them one by one:

  1. Ensure Bank Accounts are Genuine

First, banks need to use automated checks to verify bank accounts are genuine and exist or not. This immediately reduces the risk of failed payments due to mis-typing bank account information, either by consumers themselves or by customer support teams.

  1. Make Sure All Bank Account Information is Formatted Correctly

The formatting of bank account details needs to be checked consistently and appropriately to ensure that information is correct. The information should be presented in a way that payment systems can recognize.

This check also helps in getting rid of account errors before they result in failed transactions or misdirected funds.

Categories
Fraud

Phishing Email Attacks – Common Techniques and Prevention Methods

phishing emails

Phishing scams are becoming more and more common. Every day hundreds of people around the globe face many problems with phishing emails. Understanding how phishing emails work can go a long way in helping you prevent phishing attacks. 

In 2014, Sony Picture Entertainment became the victim of a major phishing attack. During that time, hackers sent phishing emails to top executives of Sony Pictures, the emails that looked like they appeared from Apple, contained a malicious link that prompted users to enter their Apple ID information into an online form. 

Over time, criminals stole over 100 terabytes of sensitive information. The overall attack cost Sony more than $100 million. 

Phishing scams gained traction in 2021, over 83% of all organizations experienced similar attacks. 

In this guide to anti-phishing, we’ll take an in-depth look at what phishing is, how it works, and the different techniques used for phishing scams.

What is Phishing?

Phishing is a type of social engineering. It happens mostly in emails. In phishing emails, the primary objective of scammers is to trick legitimate users into revealing confidential about themselves or their organizations.

In a phishing scam, attackers may trick victims into clicking a link that will lead them to a fake website. The website will ask you to enter sensitive information. Other types of scams involve directing victims to download attachments that will infect their devices with dangerous malware or ransomware.

Any domain can become the victim of a phishing attack. This is because a huge number of people use the same username and password on multiple accounts. 

According to Google’s 2019 security survey, 65% of people reuse passwords for multiple accounts. Over 60% of people keep using the same password even after a data breach.

Most phishing attacks happen with fake email messages that pretend to come from a legitimate company. Attackers also use text messages, social media platforms, or phone calls to achieve the same goal of accessing sensitive information.

How Does Phishing Attacks Work?

Based on the FBI’s 2020 Internet Crime Report, phishing was the most common cyberattack type in 2020. By 2021, it had become one of the biggest concerns for IT professionals.

Modern phishing attacks have become highly sophisticated. You may have heard of the Nigerian prince scams, it’s one of the oldest phishing scams. The scams of today use several skillful social engineering tactics to manipulate victims and steal personal information.

The best scammers impersonate legit organizations, make lookalikes of their email addresses, and send emails to look like they’re from the real organization. 

The fake emails often contain a malicious link to track the activity of the victim and to steal the user’s personal information. 

The links can also lead to malicious websites that can infect the victim’s device and track all user activity.

Commonly Used Phishing Techniques

Here are some of the most commonly used phishing techniques that are commonly used by scammers.

  1. Bait Creation

Scammers create messages, and emails that look and feel legitimate and trustworthy. They often mimic well-known companies, government agencies, or businesses to trick recipients into thinking that the text is genuine.

  1. Social Engineering

Phishers use psychological techniques to manipulate the recipient’s emotions and push them to take action.

They may also create a sense of urgency, curiosity, fear, or excitement. This surge of emotion is what compels recipients to take immediate action without thinking.

  1. Deceptive Content

Phishing emails contain links or attachments that when clicked and opened can lead to malicious websites or infect the devices of victims. On first look, these links and attachments look real, but they’re designed to steal login credentials and personal information.

  1. Fake Websites

Scammers make up fake websites that look like the real websites of big brands. For example, a user receives an email from john.amazon@gmail.com about a discount offer with a link to the product. Once the user clicks on the link, they’re redirected to aamazon.com, when they should be led to amazon.com. This is a common scam that happens to thousands of users every year.

Once the victim places the order and enters their banking information, all the information is stolen and the money is lost forever.

  1. Credential Theft

Fake websites prompt victims to enter the usernames and passwords of specific accounts. Once this information is added, the scammer steals the information and uses it to conduct scams.

Types of Phishing Attacks

The most common types of phishing techniques include:

  1. Standard Email Phishing

The scammer shares several fake emails asking the receiver to share personal information or login credentials. These attacks are aimed at large organizations as most employees have limited phishing awareness.

  1. Spear Phishing

This particular attack targets specific individuals. Attackers assume the identity of a real organization. The attacker then sends personalized emails to the target. As the text often includes specific details about the victim, it appears authentic. Over time, the victim trusts the email sender.

  1. Whaling

A whaling attack targets ‘big names’ such as high-level executives. It involves sophisticated social engineering methods to trick the victims into transferring large amounts of money into the attacker’s bank account. 

  1. Business Email Compromise (BEC)

The attackers send fraudulent emails by building a lookalike email of the account owner’s email address to attempt and steal money from the company.

  1. Malware Attacks

In a malware attack, the attacker tricks the victim into downloading an attachment or files that contain malware. As soon as a user downloads and opens the attachment, it installs malware on the device.

How to Mitigate Phishing Scams?

Businesses can protect their people and information assets from phishing attacks by simply following these simple practices:

  • Implement email security software to protect devices from malicious domains. Also, use anti-virus software to scan all emails and attachments.
  • Use training and phishing simulations to teach your employees common phishing techniques and how they work. 
  • Make sure that you always use strong passwords and multi-factor authentication to secure accounts and devices.
  • Discourage users from sharing or reusing the same passwords to minimize the possibility of credential theft.
  • Ask users to use a password manager to generate and store their passwords. 
  • Prevent users from opening emails and attachments from unknown and suspicious senders.
  • Educate users on the common “red flags” that are a sign of a phishing attempt.