Risk & Fraud

Fraud Trends to Watch in 2020

By: David Ver Eecke, Sr. Fraud Product Manager, PSCU

Cybercriminals are upping their game for bigger paydays. According to a recent Forbes article, online transactions will remain a favorite target of financial fraudsters in 2020, but they’ll become more brazen. With fraud prevention technology improving, many fraud purchase attempts are being stopped right away – and fraudsters are losing patience. Instead of trying a small, low-value purchase to see if it’s authorized, they’ll attempt that big-ticket fraud purchase on the first shot, the article says.

Fighting online fraud is a recurrent cat-and-mouse game, and it’s unlikely to change in the future, especially with the use of digital payments and e-commerce continuing to rise. While advances in digital alerts and fraud scoring models have allowed credit unions to better identify fraud activity and empower members to actively control the management and security of their card accounts, fraudsters are always trying to outsmart these technologies.

Until recently, fraudsters’ primary scheme has been to make lower-dollar attempts before going for the large purchase. This helps tell the fraudster that the card number is valid. Many fraud scoring models have adapted to catch this fraud on the first or second attempt using algorithms with various transaction elements including merchants, time of day, location, etc. Knowing this, fraudsters are increasingly bypassing small transactions and capitalizing on big-purchase items instead, especially during holidays when shoppers are spending more, or when a new smartphone model is released, so that they’re more likely to blend in with legitimate member spending.

Fraudsters have also become more willing to risk exposure to steal consumers’ credentials instead of their card information to pass security authentications and commit payment fraud.

The Most Common Types of Payment Fraud

  • Impersonation schemes – when fraudsters investigate your members and contact them pretending to be your credit union or another organization. They’ll ask for members’ account information, passwords and other sensitive information to log in to their accounts.
  • Fake charities – fraudsters will slightly alter the name of a legitimate charity to look real. This capitalizes on the charitable nature of many members who do not have time to review the legitimacy of the phony charity, especially with many natural disasters occurring around the world. Members should be wary of any unsolicited requests for donations.
  • Peer-to-peer (P2P) payment app fraud – this type of fraud is expected to increase as it becomes the fraudsters’ choice method for stealing funds from members by scamming them into transferring money through open payment apps like Zelle and Venmo.
  • All-channel fraud – fraudsters will continue to attack every channel to access your members’ account information, whether it be via phone, mobile, online or in person. They will try to find the least secure path to steal that information to commit fraud in another channel.
  • First party fraud – this type of fraud has been gaining ground since the introduction of EMV cards in 2015. Fraudsters are increasingly entering through your credit union’s front door pretending to be your valued member.

How to Prevent Payment Fraud

Credit unions can take these steps to help prevent their members from falling victim to payment fraud. First, help educate your members about the warning signs:

  • Pay attention to calls from organizations and financial institutions asking you to login to your account when you’ve been inactive.
  • Be aware of fake emails from institutions asking you to take action/click on something. Even if you recognize the name of the institution, fraudsters will slightly alter the name and branding.
  • Be aware of unsolicited SMS, especially when you haven’t requested one. The most secure method of receiving messages from your financial institution is through app push notifications.
  • Be careful of using open systems of online payment transfers, like Zelle and Venmo, to pay anyone you do not know personally. These payment systems may be convenient but are also used by scammers.

Credit unions should also review mobile deposit controls for new members. First party fraud is on the rise and can be slowed or thwarted with proper controls for checks and payment transfers.

As always, the best way to continue to keep your credit union and members ahead of fraud trends is through proactive detection and prevention.

David Ver Eecke is a Senior Fraud Product Manager at PSCU. David knows that the cooperative nature of credit unions provides a unique advantage when it comes to stopping fraud. When he isn’t working on products to increase payment security for credit unions and wage war against fraudsters, he finds time to write about topics on risk and fraud. David has worked in the financial services industry focusing on fraud and risk for over seven years.