With the digital acceleration across industries over the past year and a half, fraud has reached an all-time high in 2021. With the increase in fraud, attacks have gotten more sophisticated, including tactics for phishing, extortion and identity theft, costing businesses $42B over the last year.
As we enter the new year, and with our world only becoming more connected, we’ve gathered the top 4 emerging fraud threats that we will see companies facing in 2022 and beyond.
The Rise of Metaverse Digital Identity Passports
Digital fraud has never been so rampant, and this rise has been largely accelerated by the social media era we are living in. Leading social platforms such as Facebook have pivoted their focus to the metaverse, and are championing the use of “digital identities” for work and leisure. However, although this new technology is on the horizon, with every innovative digital advancement, fraudsters will find a way to capitalize on the new landscape and attack consumers and businesses.
As a result of the new vulnerabilities, there will be an increasing need for nimble digital fraud prevention to keep up with the pace of change. Digital identities are easy to create, so security teams will need to consider how to use these online footprints to accurately identify fake accounts and fraud attempts, while consumers will need to take steps to protect their own digital identities from being exploited by fraudsters.
AI and Machine Adoption for Fraud Prevention Accelerates in E-Commerce
Innovative technologies such as AI and ML have helped automate processes across industries, but as e-commerce has boomed, fraud has gone up exponentially. On average, the e-commerce industry gets hit with 206,000 web attacks per month. And despite 42% of businesses saying that digital fraud hampers innovation and expansion into new channels, only 34% of companies are investing in fraud prevention and mitigation.
With e-commerce booming and no signs of slowing down, AI and ML to defend against fraud will be on the rise in 2022 and beyond. This will help online retailers keep up with fraudsters evolving tactics and will help them spot patterns that might have been missed with manual checks. Using AI and ML will also help merchants analyze historical data and compare it to current transactions, which will be especially beneficial during the busier shopping seasons.
The Rise of Crypto Exchange Fraud
Crypto exchange fraud can be defined as every attack designed to extort value from a cryptocurrency exchange through illegal means. Most attacks happen when fraudsters use stolen credit cards for payment and fake IDs to bypass the KYC checks when buying cryptocurrency, which can lead to high chargeback rates. As with online banks and loan providers, exchanges are highly vulnerable to fraud because, although digital, it is the fastest way to access monetary assets.
We have seen a rise in third-party solutions like Coinbase Commerce and BitPay for businesses who want to accept cryptocurrencies. But despite their popularity, even the most secure cryptocurrency exchanges can’t protect users from advanced phishing and social engineering fraud attacks. As cryptocurrency is still fairly new, there is a lack of awareness of crypto exchange safety and protection methods which will drive the rise of fraud next year.
Economic Instability and Pandemic Fallout Means More Fraud
The pandemic shifted the way we work and play to a more digital environment, and with this shift comes more opportunities for new fraud tactics. Phishing, smishing (SMS phishing) and other similar scams more than doubled in 2020 according to the FBI’s Internet Crime Complaint Center and will only continue to grow next year.
Additionally, with the unstable economy, people were out of work and receiving unemployment and economic stimulus benefits, which will lead to an increase in financial fraud attempts. As fraudsters are able to easily create unlimited disposable email addresses or buy real emails through darket/clearnet marketplaces, they will continue to target vulnerable people online through these scams.
In the new year, we can expect to see organizations capitalizing on new digital innovations across industries; however, these modernized solutions can open businesses and consumers to fraudulent acts. As fraudsters adapt to the digital transformation in nearly every industry, attacks will continue to rise and become more advanced, and the ‘internet crime sprees” will only get better and faster. Advanced detection and prevention strategies and tools in emerging sectors will help reduce cases of fraud and will save time, money and effort in resolving attacks, which will be on the rise in 2022 as we continue to be more connected than ever.