The Cost of Fraud is Higher Than You Think: What Businesses Need to Know in 2022

Photo by Leon Seibert on Unsplash

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Whether it’s working, dating, shopping, or investing, most of us have moved the bulk of our lives to online. 

And while that’s given many of us unprecedented opportunities to find new jobs or make new connections, it’s also given fraudsters and hackers a wider playing field than ever before. According to a recent report by Crowe, the global cost of fraud was more than $5 trillion in 2021, while recent proprietary data from the AI fraud detection software company Inscribe showed a huge jump in the percentage of fraudulent financial application documents submitted online—from an industry overall average of 5%, to 13.7% in 2020. 

Experian’s annual Future of Fraud Forecast, which was released just last month, details the latest developments in online fraud and what consumers and businesses need to do to protect themselves. These are just a few highlights from the report. 

Buy Now, Pay Later

One of the biggest new developments in online fraud is the Buy Now, Pay Later space, the report says. 

The massive user growth in this space—more than 300% per year since 2018—has attracted similarly massive instances of fraud, primarily synthetic identity fraud. This occurs when a hacker uses a combination of real and false information to create a new identity. 

Buy Now, Pay Later companies will need to enhance their fraud detection and mitigation strategies to prevent user data from being compromised, as well as to prevent financial loss. 

Cryptocurrency

As a new and still mainly unregulated industry, cryptocurrency is seeing an uptick in fraud increases. 

These types of fraud attacks include scamming users out of investment earnings as well as setting up fraudulent accounts to steal and funnel crypto. One high-profile example is that of a husband-and-wife team who were recently accused of laundering $4.5 billion in stolen cryptocurrency. 

These kinds of schemes are plaguing the crypto industry and the fintech industry at large. Because these companies still mainly rely on manual document reviews by large risk management teams, they’re not adequately prepared to handle the huge increase in not only the number of users, but the amount of money that’s passing through their platforms. Companies like Inscribe are working to solve this problem, helping to streamline and automate document reviews with sophisticated software that can reduce this type of risk. 

The addition of AI-powered solutions like these to detect fraud will be indispensable this year as the fintech industry continues to grow. 

Ransomware Attacks

Shockingly, ransomware attacks raked in more money in the first six months of 2021 than for the whole of 2020—$590 million from Jan–June 2021 and $490 million from Jan–Dec in 2020, as noted in Experian’s report. 

This is one of the most significant threats to businesses, as fraudsters are using ransomware to gain access to everything from employee data and financial information to company secrets. 

One of the most important ways to prevent ransomware attacks is to educate employees, who are often the targets for ransomware through phishing or other schemes. They should be aware of what these attacks can look like and what fraudsters typically request. Similarly, companies should always back up sensitive or important data so that if they are attacked, they can quickly begin the recovery process. 

Just like everything in the online world, fraud continues to evolve. It’s critical that consumers and businesses know what types of fraud to be aware of, and how they can protect themselves, their identities, and their businesses. A bit of education, plus fraud detection and prevention tools, can go a long way. 

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.