New Fraud Threats Facing Credit Unions and Members in 2023

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Kathleen Peters Photo
Chief Innovation Officer
Experian Decision Analytics

4 minutes

Five predictions from Experian plus suggestions for what credit unions can do

Amid uncertain economic conditions, credit unions and their members are expected to see a surge in fraudulent activity in 2023. Fraudsters have become more sophisticated and have adapted quickly to finding new, creative ways to take advantage of vulnerable businesses and consumers. 

It’s critical to anticipate emerging fraud risks and leverage data and technology to identify and mitigate scams now and in the future. Experian recently released the below five fraud predictions for 2023.

Fake Texts from the Boss 

With the prevalence of remote work, employees often use various ways to communicate, including texting. Experian predicts there will be a rise in employer text fraud. This type of fraud occurs when a fraudster pretends to be the “boss” and texts an employee to buy gift cards and asks them to text the gift card numbers and codes back to them. The fraudster then uses the gift cards and the employee and the company are left with the expense.  

Fake Job Posts and Mule Schemes 

Consumers looking for work may not be aware of the fraud threats lurking on job boards. Experian predicts that savvy fraudsters will capitalize on the remote work environment by posting fake job postings that entice consumers to apply. Through the application process, consumers provide private details like their Social Security numbers and dates of birth that the fraudster then uses to commit identity theft. Experian also predicts that mule schemes disguised as work-from-home jobs will cause consumers to unintentionally act as a re-shipper of stolen goods or help move money through their personal bank accounts on behalf of fraudsters. 

Frankenstein Shoppers 

Synthetic identity fraud is the fastest growing financial crime in the United States, according to the Federal Reserve. This type of fraud involves a fraudster creating a synthetic or “Frankenstein” identity by combining real and false information and opening and building up lines of credit, eventually maxing out the credit limit and never paying it back. Experian predicts a new version of this fraud could result in major losses for retailers in the coming year. Fraudsters can create online shopper profiles using synthetic identities so that the fake shopper’s legitimacy is created to outsmart retailers’ fraud controls. As the shopper’s profile matures, criminals add stolen payment cards to the accounts. When the fraud eventually occurs, a single synthetic identity will have multiple credit lines to burn through across retailers. 

Social Media Shopping Fraud 

Experian predicts in-app social commerce fraud could result in millions of dollars in losses. These apps are designed to make shopping easy, intuitive and compelling for consumers to make purchases without leaving the app. This means legitimate brands are racing to make social commerce a part of their sales strategy. However, social commerce currently has very few identity verification and fraud detection controls in place, making the retailers that sell on these platforms easy targets for a surge in fraudulent purchases.

Peer-to-Peer Payment Fraud

Consumers love the convenience of peer-to-peer payments and usage continues to grow. Fraudsters also love peer-to-peer payment methods because they’re an instantaneous and irreversible way to move money, enabling fraudsters to get cash with less work and more profit. Experian predicts fraudsters will gain even more unauthorized access to peer-to-peer payments by using multiple social engineering techniques. Consumers will be duped into buying fake items, sending the money to fraudsters and then never receiving their orders. They’ll also be tricked into giving their account credentials, enabling fraudsters to send cash to themselves.

How Credit Unions Can Fight Fraud

As new scams emerge, a credit union’s proactive approach to combatting fraud is two-fold. First, credit unions are uniquely positioned to reach consumers through their trusted relationships with their members so they should help educate and inform them of fraud risks and how they can keep themselves safe. 

On the other hand, it’s crucial for credit unions to implement a multi-layered approach to fraud prevention that leverages data, advanced analytics and technology to identify different types of fraud and apply the correct treatment for each occurrence. By working with a trusted partner, credit unions can assess their processes and controls to develop a thoughtful strategy to protect against future fraud attacks. 

With fraud rapidly evolving, credit unions need to proactively implement the right identity verification and fraud prevention solutions to mitigate risk. Whether they are educating members or protecting their own business by leveraging the power of data, credit unions who implement the right solutions now can stay one step ahead of fraudsters. 

Kathleen Peters is chief innovation officer for Experian’s decision analytics business in North America. Peters and her team are continuously looking for new ways to solve customer challenges by defining product strategies, new paths to market and investment priorities for Experian’s decisioning, analytics and identity capabilities. Having lived and worked in Silicon Valley for almost two decades amidst fast-paced innovation, leading-edge technology breakthroughs and business model disruption has influenced Peters’ approach to strategy and business thinking at Experian. The last two years, Kathleen has been named a “Top 100 Influencer in Identity” by One World Identity, an exclusive list that annually recognizes influencers and leaders from across the globe, showcasing a who’s who of people to know in the identity space.

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