AI: A new fraud frontier
While fraudsters and their schemes are far from new, the fraud market reached an unprecedented milestone in 2023. According to data from the Federal Trade Commission (FTC), 2.6 million fraud reports were filed, with consumers losing more than $10 billion to fraud last year alone. An increase of 14% over 2022, this is the first time fraud losses have reached the double-digit, billion-dollar benchmark. The top types of fraud included imposter and investment scams, with each type of fraud loss experiencing an increase.
This increase in fraud might be due in part to the advancement of technological innovations that are now widely accessible to everyone. Take artificial intelligence (AI), for example. While tools like ChatGPT have a significant upside, there is also a downside to their widespread availability, specifically in that they don’t discriminate between good and bad actors. Generative AI programs have actually made it possible to conduct phishing or behavioral fraud techniques more easily on a larger scale, while also making them that much more convincing and effective. The result? Criminals and fraudsters have successfully figured out how to harness the power of AI.
How does this work in practice? Mimicking, for example, has seen an uptick because of generative AI. Just a few seconds of a voice recording can be used by fraudsters to convincingly impersonate an individual, potentially deceiving friends and family members even if they are the most cautious of consumers. The tools that credit unions have traditionally relied on to help protect against fraud are no match against AI, as some red flags like account not on file, number of declines and card verification value (CVV) mismatches are all proving to be less and less reliable.
Fraudsters are not only utilizing new tools at their disposal, but they are also taking an omnichannel approach, attacking from multiple different avenues. This can make detecting and stopping them a challenge if a financial institution is not monitoring all points of attack across different channels and bringing them together to create a holistic picture.
Combatting evolving fraud
The good news for credit unions is that they, too, have a new tool in their toolbox to combat increasingly sophisticated fraud attacks, and it is none other than AI. Credit unions can use the power of new technologies like AI, machine learning and data analytics to fit their protection needs, just as fraudsters have been able to do for their nefarious ones.
Today’s credit unions have access to more data than ever before, which can be a first step in identifying and preventing fraud. By using AI to analyze real-time data points across channels, credit unions can more quickly identify patterns of suspicious activity, giving them a leg up on fraudsters. Existing AI models also have access to historical patterns based on fraud they have already prevented, which means credit unions can start to reap the benefits and stop fraud in its tracks more quickly.
Knowing where and how to start harnessing the power of AI can be daunting. Partnering with an organization that has specialized capabilities and infrastructure to do just that can be the quickest and lowest barrier-to-entry way for credit unions to quickly and effectively leverage AI. These partnerships can provide access to aggregated data and proven expertise that allows credit unions to significantly enhance their fraud detection and prevention.
Finally, ensure your credit union is educating members about the fraud that exists, how it is evolving and how they can play a part in combatting it. While fliers and e-newsletters might be the most common way of alerting members to fraud, credit unions should also take an omnichannel approach by sharing their fraud awareness educational campaigns across other channels, like social media, as well. By educating members on the number and types of scams, it can potentially help them recognize fraudulent activity and avoid becoming a victim.
When all of these initiatives work alongside each other, credit unions and their members can more easily combat and even stop fraudsters in their tracks. Coming together to fight fraud, not only across the credit union industry but the larger payments ecosystem, will continue to be a key component of keeping financial institutions and their customers safe.
