3 Digital Fraud Trends to Watch for Throughout 2023
Digital identity fraudsters are constantly evolving and adapting to fresh opportunities and gaps across the online ecosystem. Every new and expanding digital platform presents a tempting target for fraud rings, bot attacks, and other looming digital identity threats.
Even well-established institutions are at risk as they expand their digital footprint. Today’s fraudsters are constantly poking at any small hole in your digital fraud armor, determined to outpace businesses’ fraud detection abilities.
The best defense is a strong offense. As you consider where to focus your digital protection plan, pay close attention to these three trends that NeuroID anti-fraud experts say indicate how fraud will evolve throughout the rest of the year.
Economic Downturn Drives Fraud Growth
Recession or not, when people find themselves in a tight economic situation for one reason or another, identity fraud has proven to be a lucrative ‘hobby’ to take on. Aite-Novarica calls them “citizen fraudsters,” and they first started catching the eye of the anti-fraud industry during the COVID-19 pandemic. These fraudsters aren’t part of a fraud ring, and they don’t consider digital theft a permanent career path. Rather, they are opportunistic and seeking fast, ‘easy’ money. When they see an especially vulnerable target—perhaps its life insurance or a PPP loan (which were even called “invitations to fraudsters” due to their vulnerabilities) they go for the fast cash grab. The combination of desperate times and easy access leads to noticeable identity fraud spikes.
Takeaway: Should predictions about the global economic downturn prove correct in 2023, we could see economies shrink and unemployment rates rise. In turn, we can expect to see growth in the already burgeoning “citizen fraudster” industry.
Bot Attacks will Take Advantage of PII-Based Anti-Fraud Systems
Digital bad actors, such as members of fraud rings, commonly use compromised PII to commit new account opening fraud and take advantage of inadequately defended companies. Insurers, fintechs, and virtually every other business where money moves online, are all at risk if they depend solely on PII-based systems for identity verification and fraud detection. The bad actors know this, which is why they’re constantly searching for access to PII. Whether it comes from data breaches, phishing schemes, the dark web, or other sources, they’ll take any information they can get.
Bots have unlocked new levels of PII vulnerability through their ability to create a large number of fraudulent applications, rapid-fire and in enormous batches, using a mix of real PII elements that sneak by PII-based digital fraud detection systems. Even if they’re flagged as suspicious, these massive scale fraudulent accounts easily overwhelm PII-based detection systems and cause manual escalations, which either thins out protection capabilities or forces a company to lose money by overzealously flagging false positives. And it doesn’t help that deploying bots requires only basic technical skills.
Takeaway: Bot-powered PII fraud is surprisingly simple, and its expected escalation ties into the citizen fraudsters trend: a simple internet search will lead to bot marketplaces and tutorials ranging from phishing to new account fraud. So while fraudsters have long employed bot attacks and malware to steal PII, as these tools have become more accessible, so have their popularity. Just as a manufacturer might seek to bolster their bottom line by realizing new efficiencies in their processes, fraudsters can get more done by automating their attacks or utilizing tools that allow them to work faster than they could otherwise.
Crypto will Continue to Gain Steam
Cryptocurrency has come farther into the field of legitimate currency than many people realize. PayPal let it onto their platform back in 2020, catching up to Square and Robinhood, who had already been allowing cryptocurrency investments in their ecommerce-ecosystems for years. Yet it still has a ‘dark web’ reputation. This reputation is arguably a bit earned, as cybercriminals and fraudsters are attracted to the quasi-anonymous nature of crypto and its lack of official regulations. According to Chainalysis’s 2023 Crypto Crime Report, last year’s levels of fraud made 2022 “one of the most tumultuous [years] in cryptocurrency history,” with an “all-time high” of $20.6B in illicit transaction volume. While not all of these illicit acts involve identity, the unregulated Wild West of cryptocurrency exchanges are considered near-perfect breeding grounds for identity fraud. Crypto’s evolution to the mainstream is unprecedented, but it’s now here to stay. And so are the identity fraudsters looking at crypto as a door to new opportunities.
Takeaway: Fraudsters and legitimate consumers alike are attracted to the ease and accessibility of crypto. Any platform that includes exchanges of money will need to consider their crypto stance in 2023 (if they haven’t already) and ensure they are ready to pivot towards the right level of identity fraud protection that must accompany this potentially lucrative—and definitely vulnerable—black sheep of the ecommerce world.
Fighting the Future of Fraud with Behavioral Analytics
At the forefront of tomorrow’s fight against fraud is the NeuroID behavioral analytics solution.
Not familiar with behavioral analytics? NeuroID’s powerful, proprietary solutions read the digital body language of your site users. As they interact with your site forms, behavioral analytics tools observe your users’ actions, looking for indications that a user is unfamiliar with the information they’re inputting—a likely indicator of fraudulent intent. We then flag risky users in real time, so your step-up verification measures can intervene and stop fraudsters before they make it into your business ecosystem.