A recent report has shown that over 42 percent of Zambians were being targeted by different types of fraud from September to December 2022.

New data published by global information and insights provider, TransUnion in its 2023 State of Omnichannel Fraud Report shows that Zambian consumers were primarily targeted by ‘smishing’ attacks, where fraudulent text messages attempt to trick them into revealing personal data.

Additionally, 36 percent of targeted Zambians experienced attempts to lure them into money mule scams, where they were solicited to transfer or move illegally acquired money on behalf of someone else.

During the same time, 35 percent of targeted Zambians experienced “phishing” attempts, where fraudulent emails, websites or social posts attempted to steal their data, while 31 percent experienced “vishing attempts,” where fraudulent callers tried to get them to reveal personal information.

All this has been attributed to the explosion of digital transactions, accelerated adoption of digital technologies, and increasing appetites for faster access to funds and credit.

Digital fraud can have a number of serious consequences, both for victims and businesses. These can include financial losses, damage to reputation.

There are many different types of digital fraud, but some of the most common include: Phishing Attacks, Cyber Espionage, Data Theft, and Online Scams.

Phishing Attacks: In a phishing attack, scammers send emails or texts purporting to be from a legitimate organisation in an attempt to trick people into giving them sensitive information such as passwords or credit card numbers.

Cyber Espionage: This is where criminals try to gain access to sensitive information by infiltrating computer networks.

Data Theft: This is where criminals steal sensitive data such as customer records or trade secrets.

Online Scams: Online scams are typically attempting to defraud people of their money. They can take many different forms, but some of the most common include fake online auctions, pyramid schemes, and bogus investment schemes.

Digital fraud can have serious consequences for both individuals and businesses.

It is important to be aware of the risks and take steps to protect yourself. If you believe you have been a victim of digital fraud, you should report it to the authorities.

Digital fraud is a problem businesses have been facing since the advent of e-commerce in the 1990s, and its threat only increases with each passing year.

But what is causing digital fraud to rise year over year? From current trends and consumer attitudes to technological enhancements and more sophisticated tactics, here are some of the reasons digital fraud is rapidly increasing:

Chaos caused by the global Covid-19 crisis: Opportunistic hackers are taking advantage of the chaotic, global crisis to commit even more fraudulent activity.

A changing e-commerce land scape: Another trend impacting the rise in fraud is more retail purchases shifting online.

Point of sale (POS) lending has also become more common, allowing customers to make payments in instalments or take out loans for purchases both large and small.

While POS lending makes it easy for consumers to gain approval and make a purchase in a matter of minutes, it also opens the door to fraudsters.

The advent of new marketplace platforms: From social networks and dating apps to food delivery, alternative transportation, and vacation rentals, digital channels have revolutionized almost every industry.

With the growing number of marketplace platforms and services available and their widespread popularity – especially in recent months – fraudsters have shifted their tactics to take advantage of rising in-app and online marketplace purchases.

Payments moving online: In addition to consumers transacting more in online marketplaces, they are also using peer-to-peer payment (P2P) and eWallet apps more often.

Users turn to these platforms to digitally split dinner checks with friends, send money to family members in other parts of the world, pay for services from a local vendor, and more. But with more than half of P2P transactions taking place between consumers and an unknown entity, the fraud risk is high.

Increasingly digital banking services: Today’s consumers demand more online and mobile services from their financial institutions. As a result, legacy banks are going digital.

They are doing more account onboarding and transaction approvals online and deemphasizing in-person transactions, which makes it harder to verify identities.

Also in response to consumer demands, a new breed of “challenger banks” – born and doing business entirely in the online world – have emerged and are differentiating themselves by providing easy-to-use and digital-native experiences.

A majority of these institutions’ customers are those who have “thin file” credit histories (i.e., don’t have much credit data). Less data means a greater risk of fraud.

New consumer expectations: Today’s consumers also expect their data to be secure. Yet they will abandon any transaction that takes too long, requires too much data, or is too complex.

In fact, 92 percent of consumers expect a fast, frictionless experience while also getting one that is as trustworthy and secure as possible.

These steep expectations are causing banks and retailers to juggle preventing losses with keeping fraud prevention measures from rejecting good customers and transactions.

Cybercriminals understand the struggle these organisations face and take advantage of those that fail to strike the right balance of secure, yet frictionless customer experiences.

More sophisticated fraud tactics: Due to an increasing number of data breaches over recent years, fraudsters can more easily access PII (personally identifiable information) and use it against consumers.

For instance, fraudsters combine real and fake data (such as an address from one person mixed with another’s social security number) to create new, synthetic identities that are harder to detect.

Then, they establish open bank accounts and cards, acting like legitimate customers.

Once they have established strong credit scores, the fraudsters ask for higher credit limits or larger loans and simply stop paying.

Unclear legal jurisdiction of cross-border fraud. Global commerce gives today’s online retailers and marketplaces an opportunity to reach even more customers. 

Forrester estimates cross-border e-commerce sales will reach US$627 billion in 2022, which would represent 20 percent of all e-commerce. However, cross-border transactions don’t come without some risk.

Because they typically encompass multiple countries, it is difficult for individual jurisdictions to properly monitor for fraud risk. Further, data privacy and protection regulations vary across regions – if they exist at all – making it even easier for fraudsters to commit cross-border transaction crimes.

Technological advancements: Today, fraud has also accelerated and grown even more sophisticated due to the rise of e-commerce, mobile payments, and computing power.

Many of the same technologies that companies rely on to innovate and rapidly introduce new products and services are also being adopted by fraudsters.

Criminals can more easily commit fraud using cheap, on demand compute power or deploy algorithms using machine learning that are subtler and more capable of manipulating fraud detection systems.

The traditional rules-based fraud prevention systems that organisations have relied on for years now struggle to keep up.

With all these factors contributing to the rise of digital fraud, it may seem like the odds are stacked against you to prevent it.

But by letting go of traditional rules-based risk assessment and instead using machine learning-based approaches, you can better recognise and combat digital fraud.

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