Combatting Financial Fraud in the Digital Age
Revolut's Call to Action
Market Status
In an age where the digital and physical worlds blend effortlessly, financial fraud has evolved into a sophisticated threat, exploiting the widespread reach of social media. The 2023 Financial Crime and Consumer Security Insight Report by Revolut highlights this growing problem, showing how fraudulent activities are increasingly leveraging social media platforms to deceive and defraud unsuspecting users.
According to Revolut, nearly eight out of ten fraud cases (77%) reported to the fintech in the European Economic Area (EEA) during the second half of last year originated from social media platforms.
As stated by the Head of Financial Crime at Revolut, Woody Malouf, to the German media outlet IT Finanzmagazin, the situation in Germany is similarly dire, with 72% of fraud cases in the latter half of 2023 originating from social media. Meta platforms, such as Facebook, Instagram, WhatsApp, and Messenger, were particularly problematic, accounting for 55% of fraud cases and 37% of the resulting financial losses. Across the EEA, these platforms were implicated in almost two-thirds (61%) of reported fraud cases, responsible for about 40% of all stolen amounts.
Identify & Act
Revolut identified two primary types of social media fraud in the EEA in 2023: investment scams and purchase scams. Investment scams promise quick wealth in exchange for large investments, although they account for only 12% of cases, they represent 61% of the total money lost. Purchase scams involve customers being deceived into buying items that do not exist or are not as described, accounting for 18% of lost funds and being the most common type of fraud.
The report underscores the urgent need for financial institutions to bolster their defenses. With advancements in technology, banks and fintech companies need to deploy cutting-edge AI-based algorithms and biometric tools to combat fraud.
To protect its customers, Revolut cracks down on fraud with a proprietary detection system leveraging machine learning and AI to analyze over 590 million transactions monthly, continuously adapting to emerging threats with advanced security features like RAT detection, virtual disposable cards, and flexible early warning systems.
Recently, Revolut has launched an advanced AI-powered scam detection feature, designed specifically to identify and prevent APP (Authorized Push Payment) scams.
This feature can determine if there is a high likelihood that a customer is making a card payment as part of a scam and, if so, decline the transaction. It then guides the customer through a scam intervention process within the app, prompting them to provide additional transaction information and showing educational stories to help them recognize potential scams. If necessary, customers can be redirected to chat with a Revolut fraud specialist for further assistance. Since its initial testing, this feature has led to a 30% reduction in fraud losses from card scams related to investment opportunities.
Revolut's efforts are part of a broader push within the fintech industry to combat online fraud. For instance, Monzo, as the first UK bank, has introduced a "Call Status" feature, that allows customers to verify the legitimacy of calls that claim to come from Monzo.
If the 'Monzo Call Status' indicates that the caller is not a member of the Monzo team, customers should hang up immediately and report the incident by tapping the call status. In case of no internet connection, the call status will reflect that, and Monzo advises customers not to engage with anyone claiming to be from Monzo until they can reconnect and verify the call status. This feature helps prevent impersonation scams, which cost UK consumers over £177 million in 2022. However, data from Revolut indicates that impersonation scams constituted only 4% of all authorized fraud cases (APP fraud) in 2023.
Revolut Urges EU Action
In light of these findings, Revolut has appealed to the European Union to take decisive action. The Fintech giant is urging national ministries and EU institutions to focus more on combating fraud at its source, social media platforms, rather than solely addressing fraud involving the impersonation of bank employees.
In 2023, the European Commission proposed new legislation, including the Payment Services Regulation (PSR), to introduce measures against fraud that mimics banking transactions. The latest directive by the European Council on how to fight non-cash payment fraud dates back to 2018.
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