Here’s some good news: fraud is going down. Or at least, the number of companies affected by fraud has decreased slightly since 2018, according to a new PwC study.
However, that bald statistic hides the less welcome news that fraud attempts are up, external threats are rising and, most tellingly, the dollar volume of turnover lost to fraud keeps rising as more business moves to a fully digital environment.
According to Juniper Research, businesses lost $20 billion to fraud last year, up 14 percent from 2020. While this is slightly lower than the rise in e-business overall, at 17 percent, it’s still a huge figure in real terms at $2.5 billion.
And larger companies are somewhat more likely to be affected, with more than half of those with turnover greater than $100 million reporting fraud, compared to 38 percent of smaller companies.
PwC’s data says companies across the board have seen sharp rises in fraud attempts, new fraud types and fraud risk since COVID.
Are IT infrastructures behind it all?
Burrowing deep into PwC’s data, it looks as if the ability to manage and control a growing number of platforms, third party interfaces and online supplier relationships might be at the core of the fraud problem.
For instance, small companies are less likely to be hit by cybercrime and customer fraud than big firms, while rates of asset misappropriation – that’s plain old theft to you and I – are pretty much the same across all types of company.
The impression that IT infrastructures create opportunities for fraudsters grows when you look at which companies get hit.
Tech firms, financial services companies and utilities providers are most likely to suffer with cybercrime and customer fraud – all sectors that rely heavily on distributed IT infrastructures.
At the other end of the scale, manufacturing, healthcare and government are most likely to be hit with theft – a finding which will surprise no-one.
A final red flag for companies that use lots of technology interfaces comes in PwC’s finding that hacking, especially by organised crime, has been the fastest-rising fraud method since the start of the pandemic.
While “customers” are collared as the second-largest source of fraud this year, it’s a fair bet that many of those so-called customers will be “smurf” accounts for criminals.
PwC’s survey suggests many companies would do well to strengthen their customer interfaces and KYC processes as a priority.
It also shows the peril of viewing outsourcing as the answer to everything. It may be cheaper, but it’s far from always safer.
PCM SAYS:
While new customer interfaces that improve service and cut costs look like a no-brainer, the integration of such technologies opens organisations up to new risks, especially Account Takeover (ATO) and synthetic ID fraud, in which fake customer accounts are synthesised from disparate sources of stolen customer data.
As well as beefing up protections, companies should also make sure they have system-wide analytics in place to identify and counter threats.
What’s more, KYC has got to be at a level that protects not just customers, but the companies themselves – even if that means more friction.
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