It’s the Most Wonderful Time of the Year… for Check and Payment Fraud

The holiday season is in full swing, and despite high inflation and economic challenges, spending is expected to rise by 3% to 4% over 2022, according to the National Retail Federation. A holiday retail survey by Deloitte also revealed that 63% of respondents plan to do their shopping through online-only retailers, lending itself to the question, what does this mean for financial institutions? 

While these results show resilience and strength in consumer spending, they also reveal an increased opportunity for scams. Payment and online threats are ever-present with evolving techniques and emerging technologies, giving fraudsters renewed chance this holiday season.

3 Common Types of Fraud to Watch this Holiday Season

Check and Transaction Fraud

With new techniques, fraudsters are capitalizing on check and related transaction fraud, trying to stay a step ahead of advanced AI and machine learning detection capabilities. In addition to check washing and duplicate deposits, the once old scam of mail fraud has become prevalent again. Back in the spotlight since the pandemic, checks are stolen from postal carriers, as well as directly from mailboxes. In addition to changing payee names and amounts, compromised accounts enable fraudsters the ability to print fraudulent checks using routing numbers and other account details.

AI Fraud

Artificial intelligence (AI) generated fraud is on the rise and poses a threat to account holder and financial institutions. Scammers are known to use AI to impersonate friends and relatives when calling their victims to ask for money, or gain access to personal identifying information (PII). When provided, fraudsters are then able to access funds or open new accounts with synthetic identities. Financial institution employees can also fall victim to such fraud by being tricked into disclosing sensitive information and providing unauthorized access to accounts and data.  

Account Takeover (ATO)

The rise in popularity of peer-to-peer (P2P) capabilities within online and mobile banking has created an environment for sophisticated impersonation schemes. Cybercriminals illicitly obtain passwords via phishing, smishing and other means. Fraudsters can then initiate unauthorized transactions, or make fraudulent requests for payment, leaving account holders and financial institutions in a deficit.

Despite the increased risk, banks and credit unions can implement various strategies to protect themselves and their account holders – from education to the implementation of modern banking platforms with real-time fraud prevention.

Protecting Your Financial Institution and Account Holders

Make Your Data Work for You

Leveraging real-time image and data within your banking platforms may give you a head-start at combatting fraud. Newer payments platforms have the ability to take advantage of this type of intelligence and enable your bank or credit union to build an account holder risk scoring model based on their banking history and unique deposit habits. This level of insight can be applied across all deposit channels, ensuring account holders can transact seamlessly, and with an extra layer of security at the enterprise level.

Be the First Line of Defense within your Digital Channels

Outdated security protocols can leave your digital banking platform vulnerable to cyber-attacks and costly losses. Leveraging robust online and mobile banking capabilities that include fraud-prevention mechanisms like web application firewalls and DDoS mitigation can provide the highest level of security. Additional built-in fraud and risk mitigation tools, like real-time security alerts and notifications, geo-fencing-based security techniques, biometric, and multi-factor authentication (MFA), can reduce or even prevent specific types of fraud.  

Educate your Account Holders and Employees

Educating account holders and employees on trends, prevention, and best practices can supplement security protocols and ultimately strengthen your fight against fraud. By increasing awareness through email and text notifications, in-branch or virtual events, and social media, you can share tips like the importance of using secure Wi-Fi networks, maintaining strong login credentials, updating browsers for more secure online activities, and more.

It's the most wonderful time of the year, but it's also a time when consumers, businesses, and financial institutions need to be extra vigilant. Get started today.

Download: payment fraud trends and best practices 

Download: rock-solid security tips for your digital banking channel

Contact Team Alogent today to discuss your banking needs and to see a demo of our solutions. 

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