Scam-Related Fraud Jumped 56% in 2024, Surpassing Digital Payment Crimes

As digital transactions play a role in the financial landscape, financial institutions invest heavily in fraud prevention tools.

Efforts to combat fraud in routine digital payments have been successful, but a new challenge has emerged in the form of social engineering scams.

According to the PYMNTS Intelligence report “The State of Fraud and Financial Crime in the U.S.: What FIs Need to Know,” these scams exploit consumer trust instead of bypassing technical safeguards. They led to an increase in fraud levels in 2024. The report showed how FIs are adjusting their approaches to fraud prevention to address this threat.

In 2024, scams became the leading form of fraud, surpassing digital payment fraud. The share of scam-related fraud increased by 56%, and financial losses from scams rose 121%, according to the report. Scams now account for 23% of all fraudulent transactions, with relationship/trust and product/service scams responsible for most losses. These scams manipulate individuals into authorizing fraudulent transactions, often using deceptive tactics. Additionally, fraud involving compromised credentials, where individuals are tricked into revealing account details, is also on the rise.

The increase in scams over digital payment fraud illustrates the changing strategies of fraudsters, who now exploit vulnerabilities in human behavior instead of targeting technical flaws in digital payment systems. As a result, FIs face greater challenges in managing fraud, with scams growing in frequency and sophistication.

In response to these changing fraud patterns, FIs are gearing their efforts toward anti-fraud technology. The percentage of FIs that reported an increase in fraud-related dollar losses increased 40% in 2024, compared to 29% last year. This trend is a result of the rise in scam-related fraud, which continues to outpace the effectiveness of traditional fraud detection systems. To counter these threats, FIs are turning to more advanced technologies.

One key development is behavioral analytics, which identifies unusual patterns of human behavior that may indicate social engineering scams. This technology has gained traction, with 26% of FIs implementing it in the past year. Larger FIs lead the way, with nearly one-third already using behavioral analytics.

Additionally, 71% of FIs have adopted fraud score solutions, elevating their ability to identify potentially fraudulent transactions before they are completed.

Despite the effectiveness of these tools, however, 83% of FIs cited cost as a barrier to upgrading their fraud prevention systems.

Amid cost challenges, 76% of FIs plan to implement or upgrade fraud detection systems, up from 49% in 2023. Among the largest FIs, 31% have already adopted new systems, while smaller institutions, particularly those with $1 billion to $5 billion in assets, are planning to do the same.

FIs recognize the need to enhance fraud prevention as the return on investment for advanced fraud detection tools is becoming more evident. As more FIs embrace technologies like behavioral analytics, fraud scores and artificial intelligence, the industry is adapting to the complexity of fraud and working to stay ahead of sophisticated fraudsters.

The post Scam-Related Fraud Jumped 56% in 2024, Surpassing Digital Payment Crimes appeared first on PYMNTS.com.