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Why fraud prevention is so important?

5
min read
Nowadays, cyber-attacks and malware targeting in the finance industry are becoming more precise, complicated and difficult to detect. Banks and payment processing companies do what they can to prevent them by regularly implementing new protection measures against new types of attacks.

The reality of fraud protection

Nowadays, cyber-attacks and malware targeting in the finance industry are becoming more precise, complicated and difficult to detect. Banks and payment processing companies do what they can to prevent them by regularly implementing new protection measures against new types of attacks. Unfortunately,traditional finance protection systems like one-time passwords, tokens and CVV2 do not sufficiently protect against new cyber crime techniques because today’s banking trojans are capable of bypassing these security technologies. Sadly, cyber-criminals are also very active in constantly developing new attack methods so that they are able to omit all protection standards.

Prevention as the measure of success

Over two-thirds of companies prefer to use the banking services of an institution that has a good reputation in terms of security. According to Statista in 2020, 1.9 billion individuals worldwide actively used online banking services with that the number forecast to reach 2.5 billion by 2024. Also, banks or financial institutions for which security is a priority and that do all they can to provide adequate fraud prevention safeguards against fraud will have an advantage in terms of retaining existing customers and acquiring new ones. What is more, a lot of companies admitted that they dramatically need an improvement of their own security measures to respectively protect online financial transactions. On the other hand, business and corporate clients require a slightly different, more comprehensive approach in order to provide them with the best possible services to ensure that their data and transactions are secure.

Who’s exposed?

Cyber criminals see customers as the weakest link in the online banking security chain. For this reason, it is easier for them to steal from private accounts than through online banking services. In any case, banks are often forced to return money, although they are not always willing to cover such losses for their customers. The second place on the infamy podium belongs to banks. Organizations lose over 5 percent of their revenue to fraud each year, according to a new report from the Association of Certified Fraud Examiners. And this is not the end. The decreasing level of trust in online transactions means that the number of discouraged customers who have given them up has also exceeded 30 million dollars. The sources of attacks may be different: users’ PC’s accessed thanks to malicious code, insufficiently secured e-commerce websites, employees who collaborate with people outside the company by leaking customer data. These could be modifications to devices that make electronic transactions, such as ATMs or refuelling machines. The possibilities here are, unfortunately, almost endless.

 

Why does fraud prevention really matter?

A typical business loses around 5% of their annual revenue due to theft and fraud activities. Globally, this stands for approx. $3.7 trillion lost.Additionally, public image and employee’s morale can suffer as a result. Many companies work without systematic fraud prevention programs or fail to reviewtheir programs on a regular basis.

A fraud prevention plan

As we already know, fraudulent activity may have many different faces and the approach towards them may be totally different as well. For instance, from the user’s perspective, it is important to:

  • avoid weak passwords at all costs
  • update your internet browser to the latest version
  • make sure that the payment is made via an encrypted site
  • not click any links, download attachments or provide personal information to unknown sources
  • remember about having a verified and updated antivirus program

For businesses, it is always important to have a system that will be able to recognize whether a transaction is legal or if it’s likely to be fraud. Here, Fraud Detection or Prevention Systems (FDS) have a chance to prove their worth. Big players like RSA, Oracle or Entrust provide these, as they are absolutely necessary in today’s reality. It’s also very important to know your employees, create a positive work environment, a clear organization structure and fair employment practices. You may also consider hiring experts like certified fraud examiners (CFE) to help you manage internal fraud possibilities.

Fraud is common

It’s very true that fraud is common and can’t be one hundred percent avoided. Bad business management and wrong practices may result in huge financial losses, but – fortunately – it may be reduced and prevented to a large extent. The cost of trying to prevent fraud is always less expensive to abusiness than the cost of the fraud that needs to be covered.

 

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