Fraud affects both businesses and individuals alike, albeit in different ways. Businesses are battling strong increases in both in-store and online-only fraud attempts in an effort to maintain profitability. For individuals, the threat fraud poses to their credit scores and financial health can be equally harrowing.
A Huge Threat
Fraud can come from inside and outside of your company, costing you more than the immediate monetary loss. For instance, occupational fraud runs companies $652 billion per year in the US alone, with individual incidents costing as much as $500,000 in upfront losses. Indirect impact on reputation and productivity can easily add to this figure over time.
Businesses in multiple sectors have noticed an uptick in fraud attempts and an alarming rate. Nearly half of the 5,000 companies surveyed reported having experienced fraud within their last two years of operation with total reported losses due to fraud at $42 billion.
While every industry experiences fraud differently, the losses are equally impactful:
Online gaming purchases
Within the gaming sector, fraudsters have turned primarily to account takeovers and the use of low-wage online “sweatshops” to gain access to victims’ funds. The industry’s growing revenue (projected to exceed $200 billion by 2023) continues to attract more capable criminals each year.
Retailers are losing up to 10% of their annual revenue to fraud and the full effects can stifle growth for years to come. Those branching out to online commerce have found it difficult to balance the user experience with their security strategy, with many often choosing one over the other to prioritize.
The amount of monthly fraud attacks on financial institutions is increasing at a rate of 15% year over year. US consumers have been hit hard by this negative trend as criminals have shifted their attention to fraudulent credit applications leveraging stolen user information.
According to a report covering 2019 and 2020, 47% of consumers in the US have experienced identity theft and 42% of those affected by it in relation to phony credit card applications admitted they would never do business with the financial organization that was at fault again.
Unemployment fraud is especially disastrous for individuals caught in-between jobs. Many find their expected financial lifeline preemptively cut when they need it most as fraud of this kind can go on unnoticed for some time. Worse still is the fact that the same people who were targeted once are 21% more likely to be targeted again.
Paying the Ultimate Price
It is impossible to overstate the risk that fraud poses to businesses. Its impact on an otherwise thriving company spans multiple facets, from finances to daily operations. Underestimating the potential negative consequences of fraud on your organization would be unwise, but it can be hard for leaders to learn what fraud’s full effects actually are. Following are some of the most pressing risks inherent to fraudulent activity within your business.
The easiest fraud risk to identify is the upfront financial effect on your business’s bottom line. However, sophisticated forms of fraud can cause unexpected losses for your company in the form of cleanup costs.
This issue becomes even murkier when fraud directed not at your company directly, but at government programs gets your organization involved. Whether your business is forced to help with detection of such schemes or take part in an investigation of some sort, attendant costs can skyrocket quickly.
Fraud erodes public confidence in both businesses and governments alike. When social benefits schemes are gamed by fraudsters, they can end up undermined by the public, putting many of those who depend on them at risk.
For retailers and customer-facing businesses, the line between blocking fraudsters and encouraging legitimate consumers can prove difficult to walk. Highly restrictive anti-fraud measures can place the burden of proof on customers in such a way that discourages them from completing transactions. If false positives creep into the picture, customers could be declined despite being legitimate. This makes companies out to be the bad guys despite their intentions.
Fraud forces companies to alter their operating practices and invest in better solutions. Failing, businesses face an ever-increasing risk of being targeted by criminals.
Cybercriminals’ tactics have evolved to such a degree that separating real customers from fraudulent ones has become a real challenge without the right tools. Old, layered systems are poorly equipped to deal with risks posed by advanced botnets and sweatshops. They are also difficult to maintain and can eat away at your operating budget if left unchecked.
Investing in Your Future
Fraudster schemes have yet to slow down, evolving at much the same rate as the technology to fight it. Businesses need to be prepared now more than ever for fraudsters’ relentless improvements and the best way to do so is to adopt suitable precautions into your organization as soon as possible.
ID verification is one of the best solutions to consider as it ensures the people you serve and work with are exactly who they claim to be.
Although fraud is a multifaceted threat, ID verification is effective at curbing it in all of its varied forms. Whether you need to keep tabs on who holds an account with your organization or you are required to make sure only the right personnel interact with sensitive data, a powerful ID validation tool is your best form of protection.
Identity validation platforms, such as Intellicheck can:
- Secure digital sales operations from synthetic identity fraud, account takeover attempts, and card-not-present fraud.
- Stop financial fraud attempts leveraging victims’ personal information from succeeding.
- Protect physical sales points from fraudulent purchases attempted with incomplete, forged, or stolen documents.
Intellicheck’s platform provides industry-leading accuracy of 99.9% coupled with sub-second speeds to bring the above benefits to your business. Best of all, the ease with which our solution can be implemented is second to none.
Whether your organization requires an API-based solution tightly integrated into existing systems or a stand-alone solution capable of being deployed immediately without any additional code being necessary, Intellicheck can accommodate it.
Reach out today to learn how Intellicheck can help make your business more secure and your customers better protected overnight.