Category Fraud/Crime

The Rise of Account Takeover Fraud

29 September 2021 Toby Carlin, FICO Senior Director- Fraud, Cyber & Compliance
Toby Carlin, FICO Senior Director- Fraud, Cyber & Compliance

Toby Carlin, FICO Senior Director- Fraud, Cyber & Compliance

Banking fraud management has always been dynamic, fast paced, and complex.

Fraudsters are constantly evolving their tactics to adapt to changes in the banking landscape and exploit weaknesses and vulnerabilities. This has only accelerated with technology advancements and digital transformation. Now, more than ever, banks need the right processes and technology to respond to any fraud scenario quickly and effectively.

One emerging fraud trend continuing to plague banks worldwide is the increase in account takeover (ACTO) fraud. ACTO fraud is when fraudsters gain unauthorized access to account information to extract funds from a person’s bank account or make unauthorized credit card purchases. This type of fraud is nothing new, but it is becoming more common. Aite research found that 64% of financial institutions are seeing higher rates of ACTO fraud attacks compared to pre-pandemic periods.

Global credit bureau TransUnion has detected a significant surge in fraud and criminal activity related to financial services in South Africa, with fraud in this sector surging over 187% in the last year.

South Africa’s data tracks global trends, where the rate of financial services fraud attempts increased 149%, the group said.

As more consumers go online for banking and other financial transactions, it’s clear that fraudsters have continued to ramp up their efforts in the financial services industry, resulting in an increase in digital fraud attempts.

Across all industries in South Africa, TransUnion reported that the rate of suspected digital fraud attempts globally rose 24% when comparing the first four months of 2021 with the last four months of 2020. In South Africa, the overall percentage of fraud attempts increased by 7% during the same time period.

Growing ACTO fraud represents a risk for banks because average losses are often much higher, and there is a risk of losing customers long term.

How Fraudsters Are Adapting ATO Fraud Techniques:

ACTO usually involves changing an account's login credentials or personal information, or registering for new services. Users’ credentials are at risk more than ever before because of numerous data breaches and sophisticated scams. Digital banking is on the rise, especially during COVID times, and new financial offerings are emerging, which means ACTO fraud is not going away anytime soon.

Banks need to be more agile than ever to get ahead of attacks by identifying and acting on pre-ACTO signals to thwart attacks. Financial institutions need intelligent, flexible, and automated decisioning solutions that enable cross-channel layered protection to be successful. The ability to quickly transform data into insights that can be leveraged for real-time decisions leading to business outcomes is paramount to fraud management.

With artificial intelligence at the centre of customer decisioning, the tide can be turned once again, in closing the gaps exploited by the modern-day fraudster. Customer behaviour and expectation will develop, evolve, and diversify in real time, and the fraud prevention ecosystem must be able to do the same – to learn and adapt, understand the nuances in genuine and fraudulent behaviour and allow real-time prevention at the point of compromise. These capabilities underpin the best fraud-fighting ecosystems today and should be regarded as essential for banks in South Africa. 

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