With the rise of high-end technologies in 2024, there’s an increase in the rate of digital banking frauds.
Many financial institutions are simplifying their banking systems and practices to ensure that customers have a better experience transacting and managing their financial resources and assets.
Even though many banks have a strong fraud detection and fraud management strategy, there’s still some risk that scammers take advantage of.
From the ignorance of victims to the failed data protection efforts of businesses that offer online shopping. There’s a lot of loopholes that scammers can exploit.
In this blog post, we’ll highlight various types of digital banking fraud and some of the best ways to protect your assets from digital fraudsters.
Let’s get started.
What is digital banking fraud?
Digital banking fraud is the act of using digital channels to steal financial resources and digital or physical assets from a bank and its customers.
Rather than physical bank robbery, digital bank fraud is sponsored by cybercrime and data leaks to gain access to customer data and the bank’s digital asset database.
These fraud attacks are done with the intent to steal money, frame victims for criminal offenses and bypass legal checkpoints.
Although digital banking fraud can be devastating, you can do something to detect and prevent fraud. SEON’s list of fraud detection and prevention tools can help you with fraud monitoring and all you need to know to ensure your assets are safe.
But before going into the intricacies of asset protection, let’s start by talking about the types of digital banking fraud.
5 Types of digital banking fraud in 2024
1. Phishing
Phishing digital banking fraud is done with the intent to trick users into revealing personal information related to their bank accounts such as card details, pins and security codes.
US lenders report that 75% of all fraud losses are related to consumer phishing.
Users are told to input these details into links that are pre-created by the hackers. It can be through emails, SMS text messages or even phone calls.
The usual question is how these users can fall for their tricks. But the answer is that they try to build trust first. These frauds are done after long periods of studying the original work of these financial and government institutions. They try to mimic them to the latter leaving out just a few details. They use formal language, similar logos, and formal email addresses. And lots of times, their attempt is quite convincing.
Now what do they do with the information they get? They copy this data and use it to either steal from their victim’s bank accounts using the access information they phished. They can also use the information to damage people’s reputation by creating new accounts with their victim’s details for criminal purposes.
2. Malware and Ransomware attacks
Malware is the short form for malicious software. This is a sophisticated attack on digital banking systems that damages computers, servers or networks to steal sensitive data.
The stolen data can include passwords, log in usernames and other financial information. It doesn’t exactly have to be obtained by downloading software. Their data can be stolen by clicking on malicious websites, email attachments and virus infected storage devices.
The malware spreads its virus silently in a person’s device and collects the information without the user realizing.
There are various types of malware:
* Trojans that disguise as legitimate software but contain a code that allows the hackers access into a person’s device.
* Banking Trojans intercept and redirect transactions to deposit the funds in the hacker’s account.
* There are also keyloggers that record the keyboard strokes of the user and sends them to the attacker.
* Spyware monitors the user’s online activity, noting browsing habits, log in credentials and other financial information that the user puts into online banking platforms.
Ransomware on the other hand is typically a request for ransom after a software or infected code encrypts or locks the user out of their device. This can happen to individuals, financial institutions and even businesses.
3. Account takeover:
An account takeover happens when unauthorized users get access into a legitimate user’s bank account. This may be by logging in with their credentials, performing transactions using their accounts and even committing frauds using their accounts.
It’s interconnected with the above listed types because malware and phishing tactics can lead to an account takeover.
They can get the information for account takeovers by phishing, malware and credential stuffing which happens when lots of previous-breach details are tried into the system to pick out the ones that match an account and work to open the system.
Hackers also manipulate bank workers to get these information at duress. The actual owners may notice an unusual login activity or unexplained transactions they or their banks cannot account for. It’s an underlying type of bank fraud that may lead to blocking the account totally or taking out all the money in that bank account.
4. Cheque fraud:
Cheque fraud is a form of digital banking fraud where cheques are altered without the knowledge of their owners. While it may not seem strictly ‘digital’ since it involves physical cheques, it still involves the digital banking systems that processes and approve these cheques.
Cyber criminals can either forge these cheques by duplicating an original one or altering the cheque details.
They can change the payee information or tweak the amount to divert some for themselves. They can also manipulate the digital image on the cheque so that they can gain access to the cheque’s benefits.
5. Identity theft:
This is one of the most common consequences of all other types of digital banking fraud. Many criminals use the stolen or manipulated information to steal the identity of their victims for personal gain like tweaking medical records, to commit crime and to steal money.
They can also use their credit information as a guarantee to bypass certain legal checkpoints and to receive benefits. They take advantage of their victim’s social security numbers and other personal information to file fraudulent tax returns, claim refunds or credits and win favors from governmental entities.
There are a lot more types of digital banking fraud. However, these are the most common and you should be very aware of them.
Now let’s see some of the ways to protect your assets from the threat of bank fraud.
How to protect your assets
Protecting your assets start from the basics like sensitive data management, knowing the rules of data compliance and being able to detect and prevent potential fraud attacks. They can all be summarized into fraud detection, prevention and monitoring measures.
1. Fraud prevention measures:
Many businesses rely on fraud prevention to ensure they don’t fall victims of online scammers. From individuals to businesses and financial institutions, everyone has a role to play in fraud prevention.
The first method of fraud prevention for businesses is proper sensitive data management.
These tips from Data Sentinel can be helpful for businesses that need to ensure they comply with privacy regulations and individuals should make sure their data is properly protected and stored.
Also, use secure connections and devices for banking transactions.
Report suspected fraud attempts immediately and examine every suspected fraud.
2. Fraud detection measures:
The first way to detect digital banking fraud is staying informed on the latest fraud tactics. You can’t detect fraud if you don’t know how they’re usually perpetrated.
There are lots of resources to stay updated on digital banking frauds including cybersecurity podcasts, newsletters, social media and social listening apps like Reddit and Quora.
Also, find out ways to differentiate authentic information from financial institutions and duplicated or mimicked information by scammers. You can also detect fraud by using geolocation tracking software that automatically detects unauthorized access to your digital banking accounts from unfamiliar and suspicious locations.
When this software detects an unusual activity on your account, it asks for a security check and may trigger an alarm and you can secure your account again.
Also, another way to detect fraud is to set a transaction limit to the amount of money that can leave your account in a particular period of time. These scammers are not aware of these limits and may try to withdraw or send amounts able the limit. This would trigger a notification to your email or SMS and you can check that early enough.
3. Fraud monitoring measures:
Monitor account activity for suspicious transactions. Use advanced analytics and machine learning algorithms to monitor banking transactions in real-time.
This helps identify unusual patterns or suspicious activities, such as large withdrawals, unusual login locations, or transactions inconsistent with your typical spending behavior.
Stop bank fraud now
Finally, fraud is never good for any individual, business or organization. The consequences of fraud are very diverse and can be long term.
It can lead to huge financial losses, lawsuits from criminal identity theft and emotional distress for the victims.
For businesses, it can lead to reputation damage, huge financial penalties and legal consequences for non compliance with data privacy regulations.
To stop all these consequences, digital bank fraud should be a topic for discussion in every business and even at individual levels.
Remember, preventing fraud is way easier than compensating for damages from a bank fraud.
