How to combat the rise of fraud during a recession

The brutal combination of high energy prices, high inflation, soaring interest rates, and global economic weakness has made the UK economy ripe for a recession until the middle of next year, according to a recent analysis by EY. Where’s there a recession - there’s also a rise in online crime. Not only do merchants have to be wary, but also consumers. 

What is becoming increasingly important to recognise and incorporate into future planning is the role of active fraud prevention. Specifically, fintech and payment players need to account for the rising cost of fraud when they build payment platforms since staying one step ahead of criminals is not a straightforward task. 

New data from SEON shows the correlation between online fraud and market dips: in the UK, the 2008 recession saw a 2.1 per cent fall in GDP alongside a 7.3 per cent increase in fraud offences. Meanwhile, in the US, at the peak of the 2009 recession, the FBI’s Internet Crime Complaints Center had 336,655 complaints of online crime, which represented a staggering 22 per cent increase from the previous year. 

As digitalisation has affected our daily lives, even more so since the pandemic, digital fraud has increased. Over the past decade, monetary losses from online attacks have not only quadrupled – but also increased more than seven times over. Specifically, the same SEON report showed monetary losses from digital fraud in 2020 were 7.5 times higher than in 2009. 

More digital channels mean more opportunities for criminals to strike – whether through mobile payments or tap-and-go. This is where the role of biometric technology comes into play, as intelligent biometrics offer simplicity and security. Since biometric data is distinctive to each individual, it is infinitely more complicated for criminals to commit fraud, particularly at scale. 

We have also seen that by allowing real-time and account-to-account payment methods, not only is the customer experience improved but so too is payment security. These measures mean that customers no longer need their card details or payment information to be stored on browsers or with merchants, which keeps their data and privacy safe and secure. Customers can also skip the hassle of user account setup. 

These methods are part of the ongoing effort to stop digital fraud, which needlessly affects far too many victims. While consumers have a role to play in staying educated on how to spot a scam, criminals are evolving their methods so quickly that businesses have an even more significant role to play in ensuring that the payment ecosystems they operate within are as secure as possible. As merchants and payment players visualise and implement these measures proactively, they will only maintain consumer engagement and loyalty in the long run.