Predicting the future is an annual pursuit at FICO, and this year my 2021 fraud predictions for the European region reflect how some of the broad trends that shaped 2020 will mutate into specific fraud challenges in the coming year.
Prediction 1: Scams Will Become the Leading Fraud Type — and Not Just in the UK
First of all, let’s start with the COVID-19 pandemic, the broadest global trend of 2020. Here’s the fraud-trend twist: In 2020, Authorized Push Payment (APP) scams are expected to eclipse card fraud in the UK for the first time, fueled by niche schemes related to the pandemic. In 2021, I believe other countries also will see losses from scams rise dramatically, higher than credit card fraud, as their citizens fall prey to criminal schemes.
Why? Because after many months of pandemic lockdowns around the world, people of all ages and backgrounds are suffering from loneliness and isolation, making them more vulnerable. Which countries in Europe will see spikes in scam losses is hard to pinpoint, but 2019 statistics released by the European Union provide clues. According to the report, financial scams have hit Europeans more frequently than any other type of fraud in the past two years, with 39% of Europeans being victimized in this way. Western Europe citizens were more likely to have experienced scams or fraud in the past two years, such as Denmark (69%) and Ireland (68%), in comparison to Bulgaria (17%) and Cyprus (26%). I am very interested to see what the EU’s 2020 report reveals.
Prediction 2: Europeans Will Be Victims of Work-From-Home Employment Scams
Working from home (WFH) was another of 2020’s biggest business trends. Many people believe that the WFH culture will continue in 2021 even as the world starts to open back up, and I predict this will drive new protective measures and new risks at both corporate and individual levels.
With millions of companies worldwide struggling to correctly set up their remote access capabilities, the risks of data leakage and hackers impersonating employees have risen. Companies will move to protect themselves and their employees by applying AI and profiling technologies to monitor remote employees, as well as implementing new controls around business email systems and practices.
At the same time, there will be a rising risk of employment scams in 2021. WFH will make it easy to millions of Europeans, in particular, to live in one country and hold jobs in another. How can this lead to a rise in employment scams? Here’s an example: A fraudster will post a fake job and tell applicants that a background check is necessary to move forward into the interview process. Eager applicants will send, say, €40 to cover the cost of the background check, as well as loads of personal information.
Multiplied over 1,000 applicants, the fraudster nets a tidy sum of cash, as well as harvesting a bumper crop of personal information. Applicants are unlikely to expect any wrongdoing if they believe they simply did not advance in the interview process.
Prediction 3: The UK Government Will Aggressively Prosecute Bounce Back Loan Fraud
I recently wrote about how bounce back loan fraud threatens to cheat the UK government out of up to £26 billion, as first-party fraud and business impersonators took advantage of COVID relief loans they have no intention of paying back.
With the payback of these loans starting in April 2021, I predict that the UK government will work closely with banks to consolidate collections efforts on delinquent loans. In the process, they will find fraudsters and prosecute them, to both recoup billions of pounds otherwise lost and to make an example out of criminals stealing money from legitimate businesses that deserved to get it.
Prediction 4: Banks Will Accelerate their Digital Transformation, to Customers’ Delight
Lockdowns and the rise of fast-growing challenger banks such as Monzo are set to condense five-year digital transformation roadmaps down to as little as 12 months. As the number of bank branches declines, banks will be forced to onboard and serve customers more effectively, digitally – and customers will cheer.
I predict that technologies like digital identity proofing, automated customer communications services and AI-powered digital assistants will deliver on their promise in 2021, giving banks the transformative capabilities necessary to survive in a mobile-centric, more branchless world.
On the backend, accelerated transformation will drive the realization that vendor consolidation is a must — managing a jigsaw of dozens or hundreds of vendors, each providing a piece of the digital experience, is not sustainable. This will only accelerate as Open Banking picks up steam, also due to COVID-driven changes in consumer banking habits and preferences.
Prediction 5: Banks Will Emphasize Customer Retention Over Customer Acquisition
It seems the pendulum always swings between two important goals: growing a customer base and retaining it. In 2021, I believe the pendulum will swing firmly to customer retention, as European banks see the opportunity of helping consumers stabilize themselves financially after the economic ravages of the global pandemic.
As a by-product of their digital transformation, banks will address consumers’ frustration with identity management, improve the fraud customer experience, and make other technology investments to shore up customer satisfaction. In this way, banks can better protect not just customers, but their own franchise.
Matt Cox, Managing Director, EMEA Fraud, Cyber and Compliance at FICO