Financial news

By Sean Lynskey

The UK’s current economic climate is as challenging as many people will have known in their lifetimes. In the aftermath of the pandemic, alongside other socio-economic factors, we have descended into a troubling cost-of-living crisis that is placing financial and emotional strain on millions of households across the country. With energy prices climbing, unemployment set to rise, and the Bank of England repeatedly raising interest rates to combat skyrocketing inflation, there is due cause for concern. 

Tough times for all. But the economic climate is not the only thing making life harder for everyday citizens – fraudsters are compounding the issue. We know that when there’s an economic downturn, instances of fraud increase, which means that today’s climate is highly appealing to fraudsters. 

Fraud is becoming more common 

With the UK recently named the card fraud capital of Europe, and fraud losses reaching a staggering total of £137 billion in 2021, it is clear that action is needed. 

While the pandemic galvanised digital transformation across almost every sector resulting in countless benefits to consumer experience, the downside has to be that the more digital our lives become, the higher the likelihood of fraud occurring. The first half of 2021 alone saw a 285% year-on-year rise in online fraud, with first-time users of digital banking making prime targets. 

Financial services and fintechs have been at the heart of driving the digital transformation and rapid uptake of new banking and financial services technologies. As such, these companies have a duty to their customers to do everything they can to prevent fraud.

The best defence

A crucial step in battling financial fraud is using technology to stop them at source. IT Support Sydney suggests building fraud protection measures into financial services can go a long way to slowing down the frequency and success rate of scams. Adding thorough stages of identity verification, correctly spotting false or misleading requests and transactions, and informing the user about the potential risks before ever pressing send are all key. 

While the sophistication and ingenuity of scammers have evolved over the years, so has the technology that fights them. Self-learning AI models are proving to be highly effective in identifying phishing calls and emails, then automatically labelling the contact as high-risk. This is particularly effective as open banking has given fraud-fighting machine learning programmes far greater data sets to study, allowing them to become more accurate.

At the same time, advances in distributed ledger technology like blockchain promise to make financial records both transparent and immutable, leaving a paper trail for all transfers, which would make it harder for scammers to make a clean getaway. 

The more people that are aware of the recent uptick in fraud cases, the better. 

Being aware of the most common types of fraud and being able to recognise the tell-tale signs of foul play can help users prevent fraud themselves. Even as fraud defences become more sophisticated, fraudsters will continue to develop more complex and ingenious methods of tricking people, so awareness campaigns and educational resources are vital in making life more difficult for swindlers. 

Banks too need to move quickly – providing rapid responses to users who are potentially being scammed, removing any misleading or fraudulent sites as soon as they go live and working with the FCA to update their site in real-time. Fraudsters work fast, so the speed with which banks share information with their users and the authorities makes a tangible difference. 

While many fintechs are already working with blockchain and AI, another solution that has the power to drastically reduce instances of fraud is being overlooked – one that does not require the same cutting-edge technology. Fraudsters prey on vulnerability and a lack of awareness, so increasing knowledge and educating people can help in stopping swindlers in their tracks. 

Know your scam

To help people recognise when they might or might not be getting scammed, it is important to understand the methods fraudsters use to get their hands on others’ funds. 

Authorised Push Payment, or APP, is the most common type of fraud in the UK. It accounted for 44% of all fraud losses last year. Here, the fraudster uses tactics such as scam phone calls, text messages and emails, as well as fake websites and social media posts, to trick people into handing over personal details and passwords.

Fraudsters can appear to be contacting the individual from reputable organisations like Amazon, their insurance provider – even their own bank. The phone numbers and email addresses they use are often almost imperceptible in difference from the real thing, making it easy for many to be deceived. 

Financial companies, from big banks down to smaller fintechs, all need to help teach their customers to recognise the tell-tale signs of fraud, and to always put their hand up if something seems suspect. Due diligence is needed before ever pressing the ‘approve transfer’ button, and if a user doesn’t know the person that they’re sending money to, they shouldn’t do it. To this end, Chetwood Financial recently published a blog on how to recognise the most common scams and what you should do to stay safe online: you can find it here. 

If the securities built into financial service platforms and products are heightened, and users are better educated and informed about the risks they face and how to stay safe, we can fight back against the rise in fraud cases that has been recorded in recent years. Finance companies have a responsibility to their customers – not just to deliver value through their products and services, but to ensure they are safe for the end-user and will not bring about more financial harm than good.

Sean Lynskey is Chief Operating Officer at Chetwood Financial. He has a rich background in applying technology to bolster operations with a proven track record in the Financial Services industry. Sean believes that integral to delivering outstanding products and customer services is succeeding in the fight against financial and cybercrime.