Scam victims stay silent, but banks pay the price
If your house was robbed or your car vandalized, you would not hesitate to report it to the police. So why do victims of financial fraud rarely report such incidents to financial institutions?
Definitions of fraud vary widely, but most focus on scams involving the loss of money. Consumers reported to the Federal Trade Commission that they lost more than $12.5 billion spent on various types of fraud final This year increased by 25% compared with the previous year. That's probably just the tip of the iceberg: Only 2 in 10 victims whose losses were less than $1,000 told the agency. The same goes for victims who had an average loss rate of just 6.7% Exceed $1,000.
Of course, notifying a government agency or law enforcement is not the same as notifying a financial institution. Surprisingly, there is very little data on this recently. a pilot study Stanford Longevity Center and FINRA Investor Education Base Published before rise artificial intelligence became a new weapon fraud found that only 15% of victims notified their bank or credit card company. At the same time, most American adults today victim Online scams or attacks, Nearly three-quarters of people experience Credit card fraud, ransomware, online shopping fraud or Similar scam.
This is a huge loss for the financial services industry, whose stability depends on trust. The reason: How financial institutions handle fraud incidents can help determine whether affected customers stay or switch to competitors. If it is a bank or investment website or Other financial institutions are unaware of the scam taken place where it can do nothing victimized customers, maintaining their trust or Strengthen anti-fraud defenses. If a consumer reports scam but don't trust their bank to get things done, their trust farther collapsed.
Pimmts Intelligence Agency Report Last month it emerged that financial fraud has become a systemic trust challenge for financial institutions that extends far beyond individual consumers. The report was commissioned by fintech company Block and is based on a survey of 15,110 people conducted in September USA Consumers found that nearly 4 in 10 U.S. households fell victim to financial fraud in the past five years.
Two kinds of losses
Whether it's counterfeit gift cards and tech support programs, or investment and Social Security fraud, individual losses can range from hundreds to thousands of dollars. For financial institutions, there is another dimension to the loss: consumer trust and confidence.
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This is because of the way banks handle the process of recovering funds after a customer reports a fraud greatly affect Customer confidence and retention. Consumers who successfully recover their funds experience a significant increase in confidence in their banks. Conversely, those who do not report often choose to leave the bank altogether. Fraud prevention company BioCatch cited data from credit scoring company FICO showing that 45% of fraud victims stop using the bank or financial institution where the crime occurred. Nearly a quarter canceled their credit cards.
Half of financial institutions in PYMNTS Intelligence study report fraud had a negative impact Customer loyalty. More than four in 10 said they had suffered brand damage as a result.
Things get worse. Nearly half of financial institutions (48%) say they have lost new business opportunities due to a loss of customer trust due to fraud. almost Many (47%) report also experiencing operational disruption due to fraud, while 36% say this experience has reinforced the need for new technologies to restore resilience and strengthen defenses.
What is clear is consume Who reports fraud to their financial institution give them a chance Intervene. This makes the post-incident recovery journey a true test of trust that determines the longevity of a customer relationship.
but first,bank must get Scam victims come forward.
I'm so embarrassed
Social psychologists know how cognitive biases—unconscious deviations from rational thinking—affect behavior. The so-called attribution bias centers on the tendency to overemphasize personal factors (personality traits, intentions). and ability) and underestimate situational, external factors ( what happened for you). For example, when it comes to financial fraud, people may tend to think that the victim wasn't smart enough or didn't pay enough attention, rather than considering external factors, such as being deliberately targeted.
A survey by the Financial Industry Regulatory Authority, a self-regulatory organization that oversees U.S. stockbrokers and brokerage firms and seeks to protect investors and market integrity, found that one-third of Americans agreed with the statement, “honestly If you become a victim…A lot of it depends on you”. Cue shame. A 2024 study found that self-blame The victim quoted one person interviewed as saying, “[I felt] Humiliation, embarrassment, stress, anger, sadness, etc., every emotion is real. Once you start telling people, you're either going to be like, 'Oh my gosh, are you okay?' or you're going to get, 'Oh, I didn't expect that to happen. you'. “
Not just victim blaming, shaming and Self-shame is at work. Research from PYMNTS and Block found that more than a quarter of victims who didn't report fraud to their bank said they didn't even know they could do so.
A major shift in the fraud landscape involves a dramatic increase in fraud by unauthorized parties. also known as third party fraudwhich involves an outside person or organization stealing or falsifying a customer's identity. Another type is first-party fraud, where someone intentionally misrepresents themselves in pursuit of financial gain, such as on a mortgage application. unauthorized party fraud, Of course, this has to do with shame. Third-party fraud, often involving stolen credentials, PYMNTS research found that by 2025, fraud will account for 71% of total losses, an increase of nearly 25 percentage points from 2024.
Frequency and average size of financial fraud financial Losses are mounting rapidly, PYMNTS reports established. So, also, yes Level of sophistication displayed by fraudsters, Enabled by artificial intelligence and relative anonymity cryptocurrency transfer. Nearly half of financial institutions (46%) say the sophistication of fraud schemes has increased dramatically over the past year, up from 35% in 2024.
it all sounds one A wake-up call for financial institutions. Banks, credit card companies, insurance companies, investments, payment platforms and Cryptocurrency and other financial institutions understand why they are scamming victims Underreporting Incidents can enhance their monitoring and detection tools, proactive customer engagement and Targeted education to minimize Fraudulent Chance of success.
