By Gergo Varga, Evangelist, SEON.
Plenty of national pride revolves around the accolades and titles a country can win. Becoming known as a “fraud capital” isn’t one of them.
Unfortunately, it’s a title that now belongs to the UK. As ThisIsMoney reports, the UK is now the card fraud capital of Europe – by quite a significant margin.
The figures come from a study by the Social Market Foundation. They show that each year, 134 people out of every 1,000 experience credit card fraud. The average cost of each fraud incident is £8,833 – another figure that dwarfs those of the UK’s European neighbors.
Second to the UK is France, with fraud figures that come close, relatively speaking. One-hundred and fifteen out of 1,000 individuals experience card fraud each year in that country. However, the average value of card fraud in France comes in at £6,069, some 31% lower than in the UK.
Figures from other countries in the study are less frightening. In Germany, there are “only” 15 card frauds per 1,000 people, with an average value of £1,885.
However, it’s interesting to note that Germany is notoriously lagging behind in terms of non-cash payments. They tend to use debit cards online and almost always cash in-store.
In any case, this means that somebody in the UK is nearly nine times more likely to be a victim of card fraud than somebody in Germany.
And it gets worse.
An investigation by The Daily Mail in June of 2022 resulted in the paper going as far as declaring the UK as the “global capital of fraud.” The investigation, spanning a range of frauds and scams, showed that UK citizens experience fraud losses “far higher than in other leading Western economies, including the United States, Canada and Australia”. Total losses add up to almost £3 billion each year.
What’s gone wrong?
It’s clearly a horrific situation, so what’s going so wrong when it comes to fraud prevention in the UK? Who’s to blame and what can be done about it?
Both the Social Market Foundation and The Daily Mail point the finger at a lack of law enforcement. The SMF describes the situation as “yet another reminder of how UK law enforcement has failed to keep up with the epidemic”.
The Daily Mail says something similar, pointing out that only 2% of police resources are dedicated to combating fraud – resources that are well-known to be stretched.
In the interest of fairness, the paper does also point out that only one in seven incidents of fraud is actually reported – to the police or to Action Fraud, the UK’s national reporting center for fraud and cyber crime. It’s fair to surmise that more still go undetected.
There are also various other reasons likely to come into play. The UK is one of the world’s major financial hubs. Furthermore, the fact it is an English-speaking country makes it a global target for technical support scams and phishing attempts.
What can be done? 4 key fraud prevention trends
At the time of writing, the UK faces an impending recession. Resources are already stretched to the limit, and neither UK individuals nor businesses can wait until the government has the desire or ability to work on combating these fraud figures.
As such, it makes sense to look at trends in the world of fraud prevention. Here are four that are helping people to fight back against this tide of financial crime:
1. Frictionless fraud prevention
Companies have to tread a fine line between preventing fraud and alienating genuine customers. Make transactions too complex and laborious, and customers will abandon their shopping carts or apply for that financial product at a different bank.
Frictionless fraud prevention addresses this problem. It uses techniques such as data enrichment, digital footprint analysis and device fingerprinting to automate fraud prevention while causing minimal disruption to genuine customers.
Here’s an example of how it can work: From as little as an email address or phone number, a company can use fraud prevention software to access extensive data about a customer; which social networks they use, whether they’re using “throwaway” or anonymous accounts, and whether they’re located where they say they are.
From this information, the software can generate a fraud score – in real-time. This essentially informs a business whether a person is clearly real and legitimate, or whether they raise red flags that should result in a refused transaction or further manual checks.
The information to make these decisions is freely available; it just requires businesses to integrate a suitable solution to access it.
2. Whitebox artificial intelligence
Artificial intelligence and machine learning are increasingly used in fraud prevention.
The key issue is that it’s often not enough for an algorithm to make a decision. The humans relying on those decisions need to understand why they were made. However many companies hand decisions off to machines, none likely wish to give total control – especially if it could mean legitimate customers are turned away as potential fraudsters.
This is where the key difference between blackbox and whitebox artificial intelligence comes into play. Whitebox machine learning allows businesses to see how decisions were made. It’s also possible to fine-tune the results, based on new fraud patterns and lessons learned.
Fraud analysts and managers are increasingly looking for and appreciating whitebox solutions as a better way to deal with sophisticated fraud.
3. User education
The importance of user education in preventing fraud will never go away. Individuals, financial institutions and companies all have to take responsibility for it, and there’s (thankfully) a growing trend toward providing the information people need.
For example, Barclays offers a range of resources, including recommended training courses to help people learn digital skills and keep safe from scams.
Data breaches remain common, and everyday internet users must remain alert to them – changing passwords and taking other recommended steps when they’re (inevitably) caught up.
4. Digital and biometric identities
Whether digital identities make it harder or easier to perpetrate fraud is something that cyber security experts could debate endlessly. However, there is a clear trend toward the use of such identities.
A biometric element to digital identities should – in theory at least – make certain frauds harder to execute. But going back to the UK specifically, nothing is currently in progress that’s notably blazing the biometric identity trail.
Plus, it should be said that biometrics are much easier to hack than a layperson might expect, which includes fingerprints as well as more sophisticated liveness checks.
There’s undoubtedly plenty that companies and individuals can do to reduce their own respective risks. However, unless a top-down approach is taken to assess where the UK is going wrong, it risks the gap between it and the “next worst” country growing larger, not smaller.
Other countries ought to take notice, too, unless they want to end up at the top of such leagues as well.
About the author:
Gergo Varga’s fight against fraud has been going strong since 2009. Working at various companies, he’s even co-funded a startup. Today, he serves as Content Evangelist at SEON, where he continues to disseminate his insight and expertise across the company and beyond. He has authored the Online Fraud Prevention Guide for Dummies and hundreds of other articles and guides. Based in Budapest, Gergo enjoys reading, tech and philosophy.