How to protect your business and customers from digital banking fraud

Banking and finance have been transformed by digital technology. From cryptocurrency to online-only banking, there are now more ways than ever for people to send and receive cash.

But more online transactions mean more people are becoming victims of digital banking fraud. Research shows that 93% of bank fraud in the first three months of 2021 was committed online — with overall bank fraud rates rising by 159% over the previous quarter.

This growing trend makes it essential to protect your banking customers with strong fraud prevention techniques.

What is digital banking fraud and how can it affect your business?

Digital banking fraud is any attempt to gain unauthorized access to a bank account and/or the funds within it. It can also affect online payment systems like PayPal or Klarna. It usually results from phishing attempts or brute force account takeover.

Fraudulent transactions cost banks and financial institutions billions of dollars every year. In 2020, payment fraud alone caused losses of more than $32 billion — and this is predicted to reach $40 billion in the next five years. Stolen funds reimbursement and customer compensation make up a large proportion of these losses.

Strict data protection laws like CCPA and GDPR also enable governments to levy significant fines against banks and businesses that don’t prevent data theft. If fraudsters manage to evade your security systems and steal personal data from your customers, you could be fined millions of dollars. Data breaches also compromise consumer trust, costing you even more in lost business.

Fraud poses a huge risk to banks and other financial services. So what kinds of digital banking fraud are there — and how can you protect your business and customers?

The different types of digital banking fraud

The most common types of bank fraud are:

• Account takeover — attackers gain control over customer accounts, often using brute force attacks like credential stuffing to verify usernames, passwords, and PINs
• New account fraud — attackers create fraudulent accounts using personal data that has been stolen or purchased on the dark web
• Identity theft — attackers successfully impersonate customers to withdraw cash or gain control of a bank account
• Card cracking — a type of brute force attack that allows attackers to validate payment card details
• Phishing — attackers trick customers or staff into revealing personal information, which they can then use to access bank accounts.

While there are many different types of fraud, most of them are carried out the same way: using sophisticated automated technology to exploit vulnerabilities in your online security.

Why banks need to update their fraud prevention systems

Security measures like multi-factor authentication, biometric identification, and complex password enforcement can help protect your customers from fraud. But these measures also pass the problem of cybersecurity on to your customers.

To provide excellent customer service and maintain consumer trust, banks need to focus on their own security setup. Traditional systems like web application firewalls are no longer fit for purpose. They can’t protect against unknown or sophisticated threats, and they require constant monitoring and updating to be effective even against known threats.

Cybercriminals are always finding new ways to evade these standard security measures. For genuine protection against automated fraud, banks must implement dedicated bot prevention solutions to safeguard customer information and funds.

How to keep your customers' data safe and secure

Here’s how you can prevent bank account takeover fraud and other cyber attacks:

• Encrypt all data — strong encryption prevents attackers from seeing and using your data, even if they manage to bypass your security systems
• Identify threats with a non-intrusive detection system — create a better customer experience by putting server-side security measures in place
• Protect mobile banking apps — apps are also prone to security vulnerabilities, so make sure your security setup covers your mobile application, too
• Implement automated bot blocking software — with a bot management system, you can detect and block malicious bots automatically, protecting your customers against credential stuffing and account takeover attacks.

Bot management for banking and financial services

As malicious online threats become more sophisticated and difficult to detect, banks and other financial institutions must invest in bot management technology that offers the best possible fraud detection and prevention.

Netacea’s bot management includes:

• An AI-powered engine that detects and blocks unknown and advanced bots
• Automated real-time response to threats, proactively protecting your website
• Server-side technology that doesn’t impact user experience or site performance
• Intelligence dashboards that alert you to current and past bot attacks.

Netacea’s bot management solution has already helped fintech companies protect millions of customer accounts from automated attacks. Find out more about how Netacea supports banks and other financial services.