Fraudsters are taking advantage of the widening fraud knowledge gap, outlining the urgent need for banks to educate and protect their customers with technology, according to Feedzai.
The report reveals that while 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.
Consumers demand accountability
Consequently, many consumers believe the responsibility for reimbursement lies with their bank, with 53% believing they should be reimbursed if they fall victim to a scam or third-party fraud. If they weren’t refunded, 77% of respondents across the UK and US indicated they would leave their bank.
Romance scams top the list as the most reported type of scam, with 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.
Fraudsters targeting unwitting consumers
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 24% are unaware of the risks of being a money mule.
In the UK, only a 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 approached on social media to become money mules.
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 53% of respondents feeling safer knowing their bank uses AI to protect them.
AI accuracy crucial for customer loyalty
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 prioritize transparency, effective safeguards, and tailored communication strategies to ensure customer loyalty and satisfaction.
“Our latest report highlights a major issue in terms of public awareness and education surrounding the distinctions between various types of financial crimes, said Pedro Barata, CPO, Feedzai.
“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,” concluded Barata.