The scams deluge that flourished during the COVID-19 pandemic and proliferates yet today has heightened the public’s fraud anxiety. Rampant fraud is also reshaping individuals’ expectations about organisations’ obligations to protect them – and the compromises they are willing to make to enhance security – according to a new consumer fraud study by AI and analytics leader SAS.

Based on a survey of 13,500 consumers in 16 countries, Faces of Fraud: Consumer Experiences With Fraud and What It Means for Businesses reveals the immensity of the global fraud problem:

• Most consumers (70%) reported having experienced fraud at least once. Four in 10 indicated they have fallen victim to fraud twice or more.
• Nearly half (47%) said they experienced more fraud in 2022 compared to previously.
• Almost nine in 10 (86%) admitted to being more wary of fraud than in the past.

The most common fraud strategies reported by survey respondents were attempts to obtain banking details or personal data. Mobile phones and email emerged as the communications channels most often used by fraudsters to make initial contact.

“When fraudsters are successful in their exploits, organisations in highly targeted industries like banking, insurance, government, retail and telecommunications serve as unwitting conduits for criminal activity,” said Stu Bradley, Senior Vice President of Risk, Fraud and Compliance at SAS. “Given that two-thirds of the consumers surveyed said they would change service providers due to fraud or if another provider offered better fraud protections, the potential consequences of inaction are substantial and should not be ignored.”

This sentiment is amplified locally, where 88% of South African consumers indicated that they’re willing to change service providers following a fraud incident or if another provider offered better assurance of fraud protection.

Speaking on the local market Marcin Nadolny, Head of EMEA Fraud & Fincrime & Data Science at SAS, said: “In a post-pandemic new normal, consumers have come to expect instant access to just about everything – and the traditional sense of brand loyalty has become very fickle. Much of the spotlight today falls on curating experiences that save customers time and money, whilst delivering brand value that they will enjoy coming back to.

Security of customers identities, accounts and payments is crucial in that context. When financial institution is not doing enough to protect consumers from fraud, it ultimately impacts brand reputation and results in poor customer retention. Based on our study consumers are now open to share more personal and behavioural data for better security - and even more open in South Africa than in Europe. Based on our experience leveraging that data and AI is a key to for best anti-fraud protection and for seamless customer experience.”

The give and take of evolving customer expectations

Consumers’ shifting attitudes underscore the importance of robust fraud defences, with 96% of respondents in South Africa indicating that businesses should be doing more to protect against fraud. The silver lining for businesses? Most of their customers are willing to sacrifice some convenience for stronger safeguards:

• Three-quarters of respondents worldwide said they would agree to more delays and checks in transactions for better fraud protection.
• Eight in 10 are willing to use biometric methods like facial recognition, hand geometry, retinal identification or voice recognition for payments and transactions. Further, more than half (57%) prefer to use unique identifiers like biometrics to authenticate at time of transaction versus remembering fixed passwords.
• Closer to home, eight in 10 South Africans expressed a willingness to share more personal data (e.g., location, behaviour, etc.) with service providers on the basis they use this information to boost anti-fraud measures.

The power of AI: Minimising friction while maximising security and customer experience

Of course, companies must strike a balance between fast, low-friction customer experience and right-sized fraud defences, particularly given the explosion of digital services. Despite the elevated fraud risks associated with digital transactions, consumers’ predilection for such services only stands to grow; 86% of respondents anticipate they will continue to use digital services at their current level (65%) or use them even more often (21%).

AI-enabled fraud detection can deliver the best of both worlds by helping companies find more fraud earlier and much more quickly, improving both the efficiency and accuracy of their real-time fraud detection and prevention strategies. Unlike rules, which are easy for fraudsters to test and circumvent, the application of machine learning can help organisations better identify anomalies in real time and stay ahead of rapidly evolving threats.

That’s been the standard for SAS’ fraud and financial crimes solutions for decades – and SAS’ commitment to developing market-leading technology in this arena continues in its recently announced $1 billion investment in industry-tailored AI solutions.

“The rapid rise of generative AI tools will only make it easier for fraudsters and organised criminal rings to outmanoeuvre traditional fraud detection methods,” said Bradley. “Employing layered fraud detection capabilities that use the same advanced analytics technologies can help organisations beat the criminals at their own game. Those who rise to their customers’ expectations can turn fraud prevention into a loyalty builder and, ultimately, a competitive edge that helps them automate and grow their business, while cutting fraud losses.”