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August 21, 2023 - Greg Oprendek

Here are the Top Fraud Trends of 2023 (So Far…)

The payments landscape in 2023 is defined by new technologies and a faster, better customer experience. FedNow arrived officially in July, bringing instant payment capabilities to millions. Contactless payments have increased in usage since the COVID pandemic to see eight in 10 customers using them. The fintech business is booming, with the global market being valued at $133.84 billion in 2022.

While celebrating all these exciting new opportunities, fraud teams know they also need to be aware of emerging threats. To find out what attack vectors are top of mind for fraud leaders around the financial industry, we asked our experts who speak with them daily which trends they’ve heard mentioned most this year.

According to fraud fighters on the frontline, these are the most talked about fraud trends of 2023 so far…

Account Takeover (ATO) and Synthetic IDs

While its inclusion here will be no surprise for many, ATO fraud’s ballooning scale is still staggering. In 2022, ATO fraud and imposter scams made up more than 35% of all fraud reports to the FTC. ATO fraud historically has increased year-over-year, fueled by data breaches and more sophisticated fraud attacks during onboarding.

One of the key frauds supporting ATO’s rapid rise is synthetic ID fraud. Fraudsters can spin up fake IDs faster than ever and have learned to evade many of the traditional rules fraud platforms use to catch synthetic IDs. That’s thanks to improved phishing tactics that are much harder for consumers to spot. The reason these are so successful is due in large part to the next trend in our list.

AI Scams and Chat GPT

Generative AI isn’t just changing entire industries—it’s changing the way we communicate online. Unfortunately, that means some of the best methods for spotting fraudsters no longer work. One hallmark of a phishing email used to be its typically shoddy appearance. Think of the poor grammar and spelling and fake-looking designs that we’re used to seeing from scammers.

But thanks to Chat GPT and other AI-powered tools, fraudsters can spin up real-looking and sounding phishing emails that fool even the most seasoned fraud fighters. Couple that with scammers’ access to low-cost labor and you have all the ingredients for a fraud explosion.

Beyond phishing scams, AI tools can generate malware more quickly and spread it through automated emails, texts, and calls. These types of scams will only continue to increase in both size and frequency as the year goes on.

Social Engineering Scams

AI-powered social engineering scams are adding sophistication to fraudsters’ attack methods. But that’s not the only new tool they have in their arsenal. Pretexting has taken off in 2023, with CEO scams and cryptocurrency frauds becoming common ways to swindle users out of their money. Likewise, fake job postings and romance scams have become typical setups for highly damaging fintech frauds like pig butchering scams.

Fraudsters running these new scams rely on one specific feature to get away without detection—authorized payment fraud. It comes as a follow-up to phishing, pretexting, or some other social engineering outreach. The goal is to have the victim authorize or push the payment through. These transfers are irreversible in many cases, especially in real-time payments.

Payment Fraud

Speaking of real-time payments, fraudsters have keyed in on new payment frauds to take advantage of real-time settlements. One of the most widely targeted payment services is Zelle. As the leading payment platform, Zelle is an obvious target for scammers. But the instant nature of transfers on the service makes it highly profitable for them as well. Combine that with Zelle’s assertion that users who authorize a transaction are responsible for them even in cases of fraud, and you have a perfect storm for fraud losses to pile up.

Zelle fraud and other peer-to-peer payment frauds begin as phishing scams, but the scope widens to include money mule scams, ATO, and other payment scams. One solution for these real-time payment frauds is real-time, AI-powered fraud detection that takes a holistic view of a transaction rather than focusing on the sender alone.

Deposit Fraud

Since the pandemic, the reemergence of check fraud as a top fraud threat has been a story fraud fighters have had to follow closely. This is the most common type of deposit fraud, but it’s closely tied with fintech and crypto scams as well.

Like many of the frauds on this list, deposit fraud has seen a sharp rise thanks to new technology fraudsters have at their fingertips. With more sophisticated social engineering scams and more creative money laundering schemes, deposit fraud methods have had to evolve too so fraudsters can keep their profits.

Technology Fueling New Frauds

Embedded banking’s emergence has created vulnerabilities beyond traditional banking systems. NeoBanks and modern cores have replaced legacy infrastructures with newer rails and networks. But in doing this, they’ve expose gaps fraudsters can exploit to penetrate the highly guarded walls within financial institutions.

These new vectors of attacks need to be protected by equally modern and sophisticated technologies like AI that can scale infinitely to support the next-generation of banking. The best tool fraud fighters have that offers the speed, scalability, and overall complete level of protection needed to stay ahead of new scams is machine learning.

When leveraged properly, both supervised and unsupervised machine learning yield powerful insights into fraud rings, hidden patterns, and new sophisticated attack vectors. Learn more about how machine learning powers modern fraud detection in our free webinar on the topic, or ask your questions in person with a member of our team of experts.

about Greg Oprendek
Greg is a passionate digital marketer, avid basketball fan, aspiring fraud expert, and Content Marketing Manager at DataVisor.
about Greg Oprendek
Greg is a passionate digital marketer, avid basketball fan, aspiring fraud expert, and Content Marketing Manager at DataVisor.