Statistics and Solutions
It is crucial to have a clear picture of how consumer fraud ripples through this country if you have the prerogative to protect your business against it. This article highlights the reality of how fraudsters operate in South Africa, targeting businesses large and small, and how you can arm your business with tools and tactics to prevent such fraudsters from harming your revenue and reputation.
Important statistics to consider
As stipulated by the PWC in their report titled “Global economic crime and fraud survey 2020 South Africa” , we saw a decrease in reported economic crime at the beginning of 2020, dropping down to 60% from the previously reported 77%. Whereas this might seem like good news, in reality, the situation is far from ideal as fraud in SA remains significantly higher than the global average of 47%. Currently, SA has the third-highest rates of reported fraud in the world.
Whereas corruption and bribery historically featured as the main concerns, consumer fraud has risen to become the most popular form of economic crime at 47% – the global average is 35%. Consumer fraud was also rated as the second most disruptive type of fraud to impact South African businesses.
Taking a closer look at what these statistics mean in South African Rands, 7% of businesses who reported consumer fraud crimes saw direct losses of R840 million in the last two years. 4% saw losses of up to R1.6 billion. The severity of these figures has urged many South African business owners to take a closer look at how fraudsters operate, and how they are able to penetrate financial systems undetected.
Types of consumer fraud crime
What does consumer fraud look like, exactly? The various types of crimes and schemes that economic criminals use to defraud businesses are listed below.
A data breach occurs when a cybercriminal successfully infiltrates a data source and extracts sensitive information such as ID numbers, names, contact details, and even pins or password. It supplies a criminal with information to commit identity theft.
Phishing is a type of social engineering attack used to steal user data, including login credentials and credit card numbers. It occurs when an attacker, acting as a trusted entity, tricks a victim into opening an email and acquiring the necessary data to commit identity theft or credit card fraud.
Spoofing is the act of disguising an identity so that it appears to be a trusted, authorised entity. Spoofing attacks typically take advantage of trusted relationships by impersonating someone that the victim knows in order to attain information with which to commit identity theft.
Deepfakes are photos or videos that have been manipulated to resemble someone else’s identity. This type of identity theft is used to trick victims into thinking they are receiving instructions from a trusted individual, or to gain access to restricted accounts.
Document forgery entails creating fake documents that resemble government-issued or other official documents, or the act of altering such documents. Forged documents can then be used to claim the identities of others in order to defraud companies and institutions.
The goal behind every fraudster’s strategy is to make companies believe that they are real, innocent, low-risk customers. Data breaches, phishing schemes, spoofing attacks, deepfakes, and forging, all serve as tactics to make fraudsters appear to be legitimate customers when they are everything but.
COVID-19 – Economic panic and risk
The economic distress caused by the COVID-19 lockdown is resulting in desperation for companies to onboard more customers faster, and so, rigorous customer vetting processes are being sacrificed in the face of panic. Additionally, more customers are transacting online from remote locations, and so fraudsters are finding it easier to fly under the radar.
There’s an influx in remote transacting as well as fraudulent activities, and companies that are transacting blindly, or transacting using dated onboarding methods, are vulnerable to risk. Not only do they stand a chance of losing billions in revenue, but they also risk reputational harm. Innocent consumers suffer from identity theft just as much as businesses do. As it stands, failing to protect your business against fraud is also forfeiting on the security of consumers.
Verification technology as a solution
How you respond to incidents of disruptive fraud is what makes all the difference. Traditional methods of identification and verification, such as manual paper-document verification will no longer suffice as an effective response to future fraud prevention. Fraudsters have long been using identity theft and forgery to manipulate and abuse manual paper-based verification systems. Thankfully, technological advancements in the verification industry present viable solutions.
On a global scale, 60% of businesses reported having turned to technological innovations to improve risk management strategies. In South Africa, 30% of businesses report that they have turned to technology in the fight against fraud and that opportunities in the digital verification sphere are proving to serve as successful prevention tools.
The potential of digital verification methods
As we know, identity verification is where the process of fraud prevention begins. Once fraudsters pass initial identity checks undetected, they are through the gate and can start manipulating your financial ecosystem. By blocking access to such high-risk individuals, you are strengthening your risk prevention strategy.
Digital identity verification software has been the most effective tool to combat fraud in the arena of risk mitigation technologies. It provides a simple process by which customer data can be electronically verified within seconds. ID numbers, physical biometrics, demographics, contact details, addresses, and bank account details are but some of the information that these applications can verify.
With digital verification, there is no need to sacrifice the rigidity of vetting processes as it offers a quick and easy way to ensure you are dealing with consumers who are, in fact, who they claim to be.
Going forward with confidence
Unfortunately, it is clear that the South African economic landscape is a fraudster’s playground, and businesses have a responsibility to make sure that they don’t become a statistic. If you don’t have fraud prevention strategies in place, or if you’ve been using traditional methods of consumer verification up until now, it’s time to get a step ahead of the fraudsters out there.
Ridding your internal processes of vulnerabilities with consumer verification services is the best way forward. It’s time to put your confidence where it is deserved – with true consumers who want to support your business, and not with criminals who want to destroy it.