Connect with us

Business

Defining Fraud in 2023

Published

on

Scott Buchanan, Chief Marketing Officer at Forter

Fraudsters are fluid — they constantly experiment with new tactics to find cracks in a merchant’s defenses. In 2023, there are five trends that merchants need to be aware of — we saw each in 2022 and expect to see them with even more frequency in the year ahead.

Human ‘Bot’ Farms

First, let us acknowledge that while “human bots” is an oxymoron, it is also highly insensitive. At present, our industry lacks a better way of describing the practice. It used to be that human ‘bot’ farms referred to sweatshop-style arrangements in which poorly paid workers, often in developing countries, spent their days on brute force attacks, solving things like CAPTCHAs.

Now, though, a new twist on this old theme has arisen. In short, human bot farms use trafficked humans to scale their fraud operations. Often, they behave as bots, conducting brute force (and similar) attacks.

Human bots were widely recognised in fraud manager communities as a driving force behind recent repeated attacks, especially during the holiday rush. For example, human bot farms bombarded merchants that offer limited edition merchandise, decreasing the chances that prized products find their way to (and ultimately frustrating) good customers. These same operations also applied several tactics that follow at a scale that overwhelmed some fraud solution providers and their merchant customers.

Low-tech Address Manipulation

In the past year, fraudsters reverted to old tricks to circumnavigate rule-based fraud prevention as we saw an uptick in low-tech address manipulation. Consider a merchant with a rules set that checks a shipping or billing address against a negative list. And let’s say a noted fraudster has an address of 123 Main Street that is on that list. Therefore, any transaction with a shipping or billing address of 123 Main Street will be blocked by rules.

Fraudsters found an easy workaround. They simply write a variation of the address during checkout that evades the rules but can be easily understood by FedEx, UPS, or any other delivery company. For example, 123 Main Street becomes One-two-three Main Street or 123 Maain Street.

This should be simple to identify and block in theory. Still, fraud managers were frustrated that rules-based solutions — even those that applied artificial intelligence to speed rules application — struggled to spot this manipulation. During the Black Friday rush, more than one vendor threw up their hands and admitted they had no way to stop this tactic effectively. And as a result, fraud teams with these solutions had to manually review a growing queue of transactions.

Triangulation

With the growing presence of marketplaces to exchange goods, fraudsters are using triangulation more. Think about this as ‘stolen to order’ (instead of made to order). A fraudster posts a sought-after item for sale on a marketplace; in 2022, some of the most popular items for triangulation were high-end ‘cozy’ blankets, sneakers, gaming systems, and other electronics.

When a consumer buys an item from a fraudster on the marketplace, the fraudster then steals the item from a merchant. They input a shipping address for the marketplace buyer at checkout, which typically evades address verification checks. The marketplace buyer gets their item; the fraudster gets their money; the merchant gets penalised, and the marketplace is entirely unaware.

Fraudsters prefer triangulation because they don’t make any effort until they have a buyer — they never have to worry about stealing something they can’t sell, and they never have to touch the merchandise (further reducing their operating costs).

Double-dipping

Emboldened cheaters are attempting more brazen tactics. A prime example of that is double-dipping — while this is not new, we did see more attempts (especially from amateurs and previously good consumers) to double-dip in 2022.

Double dipping can take any form where a bad actor wins twice. For example, the bad actor makes a purchase and has the product shipped. They tell the merchant the item was not received and simultaneously file a chargeback with their issuer. Since it may take hours or days for the issuer to inform the merchant of the refund request, the communication gap can mean the bad actor receives money back from both entities and keeps the product.

We’ve also heard examples of bad actors buying and receiving an item, then filing a return, yet failing to return the item. Instead, they send the merchant back a package with rocks (or something else weighted). In one particularly devious example, a bad actor filled a bag with dry ice, which evaded a weight check by the delivery company, and then arrived at the merchant as an empty package.

Friendly Fraud

The best-known form of friendly fraud is chargeback fraud when a customer makes a purchase and receives it but files a fraud chargeback claiming that the purchase was made by a fraudster. This form of friendly fraud has been growing dramatically in recent years. Less recognised is that other forms of friendly fraud — which can also be labeled policy abuse — are increasingly serious.

For example, a consumer buys a sweater as a final sale. When it arrives at their doorstep, they realise it doesn’t fit as they’d hoped. Disappointed, the (previously good) consumer contacts the merchant to claim the sweater never arrived (code = Item Not Received) and demands a refund. The consumer now has the item they can wear (hey, at least the fit is close) or resell on a marketplace for profit.

Friendly fraud can also surface as returns abuse (returning items worn or outside of store policies), promotions abuse (re-using new customer discounts or other voucher codes), and more.

Friendly fraud is difficult to stop since it is often perpetrated by good consumers — they don’t appear on negative lists or fail basic rules. But professional fraudsters get in on the same acts, industrialising the consumer problem by increasing its scale and professionalism significantly. To increase their odds of success, they have gotten pretty systematic about this form of fraud. For example, on the dark web, fraudsters have shared the exact language to use when calling specific large merchants or issuers to nearly guarantee a refund or chargeback.

Parting Thought: The Power of Identity

The above tactics that fraudsters used with some success in the past year generally exploit gaps in rules-based systems (deployed by the merchant and/or offered by a fraud solution provider). These tactics don’t work when you can pinpoint the identity behind an interaction.

When you can be statistically confident that the identity entering an address of “One-two-three main street” is associated with fraud, it doesn’t matter what they enter in the address field; their transaction attempt is blocked. When a known fraudster is attempting to put an item up for sale on a marketplace or purchase an item with a net new shipping address, you stop them. And when they try to re-use promotional codes repeatedly, you reject the attempt.

You cannot pinpoint an identity with rules — instead, you need a massive graph of online identities and as much data as possible on each. While fraudsters always manipulate aspects of their identities, they cannot mask thousands of data points. Next-generation fraud solutions that use machine learning to augment human expertise can pattern match and pinpoint identity.

And to build the largest identity graph, you need a consortium of the largest merchants — collectively, they will ‘know’ the vast majority of online identities. And in this model, an identity — a bad actor or a good customer — known to one merchant is immediately known to all merchants.

And that is why the final trend for 2023 will be merchants abandoning rules-based systems at an increasing rate. That includes the rules-based fraud solution providers masquerading as machine learning (but really just speed up the application of rules). To combat more sophisticated fraudsters, merchants will make decisions based on identity. They will seek out the largest identity graph in order to achieve superior results.

Business

Accounting Automation in the Future

Published

on

Accounting automation is the process of streamlining repetitive tasks in financial processes. For example, some processes like invoicing are time-consuming and repetitive. Automation can reduce manual labor and save businesses both time and money. Also, it helps improve accuracy, reduces errors, and provides more accurate financial reporting.

Accounting automation in the future will be increasingly important for businesses to stay competitive. But every new change comes with both advantages and challenges. Let’s dive in to get ready for this future trend.

 

Potential Future Benefits of Accounting Automation

Increased Efficiency and Cost Savings

Accounting automation is a great way to increase efficiency and cost savings. For example, AI bookkeeping uses advanced algorithms to automate many accounting tasks. So, companies can track expenses, prepare financial reports, and more using AI.

It reduces the time needed for manual entry. So, businesses can spend fewer labor hours on tedious processes. They can increase efficiency by freeing up resources for more strategic work. It also helps reduce errors and inconsistencies associated with manual processes. So, the cost of compliance is lower because of greater accuracy.

 

Improved Accuracy and Reliability

Accounting automation can improve accuracy and reliability in accounting processes. For example, Automating bank reconciliation is less prone to errors from human mistakes or miscalculations. You can automate the process to identify discrepancies between the bank statement and accounting records. It helps to ensure that financial reports remain accurate and reliable. So businesses can take corrective action faster than processing data manually.

 

Streamlined Business Processes

Streamlined business processes involve eliminating unnecessary steps, reducing paperwork, and automating repetitive tasks. This allows businesses to focus on higher-value activities, such as developing new products, improving customer service, and developing strategic plans for the future.

 

Making a Better Decision

Accounting automation can enhance decision-making in 3 ways.

1. It enables businesses to access real-time information from multiple systems. So they can identify trends for better decision-making.
2. Automated accounting also helps with forecasting, budgeting, and auditing tasks. It enables businesses to be more proactive in their decision-making processes.
3. Also, automated accounting tools can integrate with enterprise resource planning (ERP) systems. They can manage data across the enterprise and make concise decisions that are favorable to the company as a whole.

 

Increase Customer Satisfaction

Accounting automation can help businesses increase customer satisfaction by streamlining their processes and providing a more efficient customer experience. For example:
4. Automated accounting systems can automate tedious manual tasks such as invoicing, data entry, and payroll processing. This allows businesses to focus on other aspects of their operations that are more important for customer service.
5. Automated accounting systems can also provide customers with more accurate and timely financial information. The information can help them make better decisions about their finances.
6. Also, accounting automation enables businesses to respond quickly to customer inquiries. It helps reduce wait times and improve the overall customer experience. So, you can build better relationships with their customers.

 

Improved Accessibility

Accounting automation takes place online or comes with cloud-based solutions. So, you can access your information and do your job from anywhere instead of being confined to one spot.

 

Challenges to Implementing Accounting Automation in the Future

Cost of Technology Infrastructure Upgrades

Automating an accounting system often requires businesses to invest in new hardware and software, such as servers and other associated equipment. These upgrades come with a hefty price tag that may be difficult for small businesses to afford.

There are also extra costs, such as installation fees, setup charges, software licensing fees, cloud storage costs, and maintenance fees.

 

Training Requirements for Staff Members

Accounting automation involves using advanced technology to automate certain processes. So, it creates a need for trained staff members who can handle the new technology. Training requirements vary depending on the type of software used.

Some common training includes record-keeping procedures, software applications, and troubleshooting skills.

 

Regulatory Compliance Issues

Accounting automation can be a time-saver, but it also requires firms to be aware of the applicable rules and regulations. Companies must ensure that their automated systems are compliant with relevant laws and regulations such as Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), and other applicable accounting standards.

Besides, they must also comply with legal requirements related to taxes, financial statements, and other reporting obligations.

So, businesses must consider the complexities of regulatory compliance when automating accounting.

 

Security and Data Protection Concerns

As businesses move their accounting processes to the cloud, they are exposed to a wide range of potential security risks. Data breaches can cause significant damage to the business’s financial and reputational integrity. Besides, the complexity of automated accounting systems can make it difficult to identify and detect suspicious activities or errors in the system.

To ensure data is kept secure, businesses must have strong measures in place to protect against unauthorized access, encryption, and regular backups of data.

Furthermore, companies must train their staff on the proper use of the system. It helps staff to know how to protect confidential information from being accessed or misused by unauthorized personnel.

Businesses may also need an experienced IT team to monitor and maintain the system to keep up with any changes or updates for optimal performance.

 

Final thoughts

Accounting automation has come a long way in the past few decades. It is likely to continue to advance in the future. As technology continues to evolve, more businesses will likely begin taking advantage of automation in their accounting processes. So, businesses should be aware of the potential challenges and prepare to stay competitive.

Continue Reading

Banking

How banks can help customers during the cost of living crisis

Published

on

 Lavanya Kaul Head of BFSI, UK & Ireland, LTI Mindtree

 

Surging energy and food prices are significantly driving up household expenditure, which means living standards in the UK will fall to 2.2% this year, according to the Office for Budget Responsibility. This is the biggest drop in any single financial year since the records began in 1956-57.

It’s a tough situation for many consumers who are still struggling with financial hardship following redundancies and pay freezes from the pandemic. According to TSB’s Money Confidence Barometer, 82% of people have experienced an increase in the day-to-day cost of living. This resulted in almost a quarter of them using their savings, while one in five changed their usual spending habits and behaviours.

As the financial situation worsens, consumers are increasingly relying on their banks for help and support. But, while banks can’t control inflation, energy or food prices, they can play a more supportive role by adapting their services to offer stronger customer service, better tools for financial management and be more flexible with loan repayments.

 

Strengthen customer service with intuitive AI solutions

Since the pandemic, consumers have changed the way they bank, using more mobile apps for primary banking rather than going into physical branches. This provided an opportunity for banks to accelerate their investment in digital services including automation and offer customers more support during the cost of living crisis.

Lavanya Kaul

Effective tools include AI-powered chatbots which respond intelligently to customer enquiries to quickly help troubleshoot problems and provide useful advice. But to be successful, you need to ensure you strike the right balance between an efficient and convenient process and creating a personalised experience. Customers need to feel like you understand and care about their problems and are here to help, rather than just fobbing them off with a monosyllabic bot. To avoid this, banks need to embrace intuitive AI solutions to ensure that empathy comes across in all automated interactions with customers. While doing that, messaging is key. In times of stress, we don’t function as well and financial struggles are a huge stressor. The clearer the message and the simpler the instructions, the better.

Financial education, when combined with technology solutions such as open banking, can offer more long-term solutions for people to navigate their finances. This can help put more information into the hands of the consumer to help them grasp their financial situation better. Some banks have cracked this with innovative solutions like HSBC’s Financial fitness score tool that can analyse your money habits and signpost you towards ways to improve your financial health. This may include joining one of the financial education webinars run by the bank or having a ‘financial health check’ with a member of staff.

 

Launch money management features & apps

Introducing money management features and apps to increase the visibility of a customer’s financial situation, empowers them with the information they need to make smarter choices.

TSB offers Spend & Save and Spend & Save Plus current accounts which include a savings pot that enables customers to put extra money aside when they can and an auto-balancer feature that automatically transfers money from the savings pot into their current account if their balance falls below a certain level. This allows them to start building up savings and protects them from unnecessary overdraft charges.

Personal financial management (PFM) apps also help customers get a better understanding of their finances. These connect with a customer’s bank account and enable them to keep a close eye on their spending habits and track upcoming bill payments. An example is Prism, a PFM app which allows customers to manage bill payments by sending them reminders about due dates. It also provides a summary of their income, account balance and monthly expenses at a glance, therefore consolidating all their financial information in one place and saving time on bill payments.

Lloyd’s Banking Group and HSBC launched a subscription management tool for all customers on mobile, allowing them to see and cancel recurring card payments for things like TV subscription services. HSBC says that during the first quarter of the year, it led to customers dumping around 200,000 subscriptions.

 

Introduce payment holidays

While improved customer service and financial management tools are important support tactics, they might not be enough for more vulnerable customers. For example, those who are about to default on mortgage payments or loans due to redundancy or periods of ill health need banks to do more, like offering payment holidays. Banks relaxed the rules for payment holidays during the pandemic, so they should consider doing it again to help more vulnerable customers through the crisis. Customers need to understand that they are not alone when experiencing financial difficulties and that help is available

 

Ride out the crisis together

As inflation reaches a 30-year high, customers are now more reliant than ever on banks for guidance and support. But to provide the right level of service, they need to move away from their traditional ways and behave more like technology companies by embracing automated solutions to create the right products and services for customers. Then layer on top of that the need for more personalised and empathetic customer interactions, as well as consider additional support for more vulnerable customers.

While we don’t know how long the cost of living crisis will last, what we do know is that the pressure on household finances is likely to get worse before it gets better. Therefore, banks need to step up, be the supportive partner and do whatever they can to help customers. After all, the only way we can ride out the crisis is by supporting each other and working together.

 

Continue Reading

Magazine

Trending

Business16 hours ago

Accounting Automation in the Future

Accounting automation is the process of streamlining repetitive tasks in financial processes. For example, some processes like invoicing are time-consuming...

Banking2 days ago

How banks can help customers during the cost of living crisis

 Lavanya Kaul Head of BFSI, UK & Ireland, LTI Mindtree   Surging energy and food prices are significantly driving up...

Finance2 days ago

Weathering the economic storm in 2023

Nikki Dawson, Head of EMEA Marketing at Highspot   New year, new business challenges. When it comes to creating and...

Business3 days ago

Three ways data can help financial organisations thrive in today’s economy

By Rinesh Patel, Global Head of Financial Services, Snowflake   Financial organisations are caught in the middle of an ever-evolving...

Finance3 days ago

What is the right strategy for the end of money?

By John Barber, VP & Head of Europe at Infosys Finacle More than five thousand years ago, humans replaced barter...

Business3 days ago

2023 – what will happen in the payment world?

Tommaso Jacopo Ulissi, Head of Group Strategy, Nexi Group 2022 was a year of transition for consumers, as BNPL (Buy...

Business3 days ago

2023 crypto trends that businesses need to know about

By Marcus de Maria, Founder and Chairman of Investment Mastery   As cryptocurrencies have started to enjoy wider global acceptance...

Business3 days ago

Defining Fraud in 2023

Scott Buchanan, Chief Marketing Officer at Forter Fraudsters are fluid — they constantly experiment with new tactics to find cracks in...

Business4 days ago

How accounting software may hold the key to keeping on top of credit control

By Paul Sparkes, Commercial Director of award-winning accounting software developer, iplicit.   One of the first rules everyone learns about...

Banking4 days ago

Coreless Banking: How banks can thrive in 2023

Hans Tesselaar, Executive Director of BIAN   In recent years, banks have faced immense disruption and struggled to transform with...

Technology4 days ago

Will cyberattacks be uninsurable in 2023? Three steps that financial organisations can follow now

By James Blake, Field CISO of EMEA, Cohesity   The growing number of cyber attacks and subsequent damage has led...

Business1 week ago

Why Financial Services Institutions must de-risk the customer journey in 2023

By Perry Gale, VP EMEA at Cyara   From rising interest rates, to the cost-of-living crisis and the ongoing recession,...

Business1 week ago

Why finance needs a technological leap in fraud prevention

Brett Beranek, VP & General Manager, Security and Biometrics at Nuance Communications   Banking fraud is always a punishing experience for...

Banking1 week ago

How Banks Should be Future-Proofing Themselves  

By John da Gama-Rose, Head of BFS, Global Growth Markets, Cognizant  Businesses across the world are facing a combination of...

Business1 week ago

The Promise of AI in Financial Services in 2023

By Kevin Levitt, Global Industry Business Development, Financial Services, NVIDIA   As we enter the new year, many are left...

Banking1 week ago

What to expect from banking and payments in 2023

Michael Mueller, CEO, Form3   The banking industry went through a number of significant challenges in 2022. The steep increase...

Business1 week ago

The big cash squeeze: will fortune favour the bold?

With a new political landscape, rising inflation, a cost-of-living crisis and increasing pressure from HMRC for payments, many businesses are...

Business1 week ago

How scaling agility can help mortgage lenders thrive in a tough economy

By Angus Panton, Director of Banking and Financial Services at Expleo   During periods of economic uncertainty, speed and agility...

Financial Services Is Stepping Into A New Era Financial Services Is Stepping Into A New Era
Business1 week ago

Embracing eCommerce: what retailers will face in 2023 

by T.R Newcomb, VP, Strategy and Corporate Development, Riskified     2022 has been a tumultuous year, with rising interest rates,...

Business1 week ago

Five steps for getting compliance right

 Troy Fine, Director, Risk and Compliance, Drata   With the accelerating pace of regulatory change and operational resilience policies, organisations...

Trending