Financial institutions around the world face a surge in fraud and cyber attacks, according to a new report from LexisNexis Risk Solutions. Explore The State of Digital Fraud study revealed that in 2023, digital fraud attacks in the financial services sector will increase by 17%.
According to the report, human-initiated attacks in financial services increased to 1.2% last year, up 8% from 2016. Of note, North America saw attack rates increase by 30%, while Asia Pacific (APAC) and Europe, Middle East, and Africa (EMEA) saw declines of 15% and 24%, respectively.
The financial services industry continued to experience the most automated bot attacks in 2023, with 1.8 billion attacks, half of the global total of 3.5 billion. Despite this high number of attacks, the number of bot attacks in the sector decreased by 6% year-over-year.
Financial services saw a 12% year-over-year increase in new account creation attacks driven by an increase in the mobile channel, primarily mobile browsers. New account creation fraud occurs when fraudsters create new accounts, often using stolen or synthetic identities, to access online services or obtain lines of credit.
Payment fraud, where stolen payment credentials are used to make illicit transactions, has increased 9% year-on-year, indicating increased financial risk for banks. The increase in payment fraud is primarily occurring through the mobile channel, with attackers increasingly turning to alternative payment methods such as direct deposits.
Digital fraud on the rise
The annual LexisNexis Risk Solutions Cybercrime Report Here are key trends in digital fraud from cybercrime attacks detected within the LexisNexis Digital Identity Network: Considering activity that occurred between January and December 2023, the analysis examines consumer interactions at various stages of the online journey, including account creation, logging in, making payments, resetting passwords and transferring money.
Overall, the study found that digital fraud attacks across all sectors will increase by 19% year-on-year in 2023, with the most notable increases occurring in North America, where they increased by 43% year-on-year, and in the e-commerce sector, where they increased by 59% year-on-year.
Automated bot attacks remained stable in 2023 compared to the previous year, although targets changed. Gaming and gambling organizations saw a 103% increase in bot attacks in 2023, while e-commerce bot attacks remained elevated after a significant increase last year, suggesting they may set a new benchmark. Meanwhile, financial services continues to be the most attacked overall.
The most common type of fraud is account takeover by a third party
The most prevalent type of fraud in 2023 was third-party account takeover, accounting for 28.7% of all incidents. This type of attack occurs when a bad actor gains unauthorized access to a user’s account on a third-party platform, service, or application. This typically happens through phishing, credential stuffing, social engineering, or exploitation of a platform’s security vulnerabilities.
Other types of fraud prevalent in 2023 included fraud (16%), bonus fraud (16%) (where bad actors exploit promotional offers and incentives offered by online platforms to gain an illegal advantage), and first-party fraud (14.6%), where legitimate customers intentionally misrepresent themselves or their actions in order to gain financial or material benefits.
The report also noted a surge in authorized payment fraud, also known as authorized push payment (APP) fraud, particularly in Southeast Asia, where fraud centres have proliferated.
Several closely-knit organized crime groups, primarily based in China, Operate Cyber scams are widespread across Southeast Asia, mainly in poorer countries such as Cambodia, Laos and Myanmar, and their scams typically attempt to scam unsuspecting victims from around the world out of their savings.
These fraud centres often employ thousands of people, most of whom have been illegally trafficked by criminal groups and forced to work in inhuman and abusive conditions. Estimated value More than 200,000 people are said to have been trafficked to Myanmar and Cambodia to perpetrate these online scams.
These organized crime syndicates rake in nearly $3 trillion in illegal revenue each year, CNN reports. Reported By March 2024, one international group will reportedly be making a massive $50 billion a year in profits.
For more information on the current state of fraud in Asia Pacific, download the report, “Trust Amid Chaos: Managing Fraud and Fraudulent Activity with Data and Analytics.” This link.
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