Trending: Intensity of Financial Scams Builds Pressure on Banks to Regain Consumer Trust

The flood waters have yet to recede.

In Florida, the devastation is not fully accounted for, and the costs are not fully tallied. All of that will take time.

However, the fraudsters are already on the case because they seize on any opportunity to find would-be victims at their most vulnerable as they dig out from the impacts of Hurricanes Milton and Helene, Featurespace founder Dave Excell told Karen Webster.

At the same time, governments and banks are tasked with moving money urgently — including relief funds and disbursements — to individuals and families, who might not be as vigilant against scams as they normally would be given the stress of the recovery efforts.

“The flood of messaging that will come from the scammers will be looking to prey on people — and [that messaging can] target the specific locations that have had the most devasting impacts,” Excell said.

The methods are tried and true — text messaging, calls and synthetic IDs, used as fraudsters offer access to generators and building supplies needed in those communities.

Beyond the immediate opportunities presented by natural disasters, fraud has been a long-standing trend and pervasive. Joint research between PYMNTS and Featurespace found that 3 in 10 U.S. consumers have fallen victim to scams in the past five years with a median loss of $545.

“They’ll choose whatever’s in short supply,” he said.

Beyond the Financial Impact

The impact extends beyond the individual’s wallet.

More than half of victims consider switching banks after being scammed, and 30% leave. Then, the bank must scramble to replace that clientele and repair the damage to its reputation. More than half of those impacted by scams said their mental health suffered because they felt somehow responsible for being victimized in the first place.

“Most consumers have multiple relationships with different banks, and they will switch allegiances quickly based on where they feel there’s the highest level of trust and confidence in the relationship,” Excell said.

Banks must start “slowly” with incremental steps to address the financial and emotional trauma of those losses, he said.

Against that backdrop, there is much banks can change about their relationships with their customers so they can remain or regain their status as a trusted source, even when there may be potentially suspicious activity in the mix and if customers fall prey to criminal activity, Excell said.

The low-hanging fruit is easy to address. Banks must remove the stigma of coming forward.

There’s likely a vast under-reporting of fraud, as customers are gun-shy and embarrassed that they have been taken in. Along with that under-reporting, banks may not know just how vulnerable their customers (and they) are.

Much can be improved if banks craft education and awareness campaigns underscoring that fraudsters are sophisticated and there’s nothing to be embarrassed about when reporting a scam, Excell said. Banks can and should highlight their successes in stopping fraud in its tracks and how the information can be used by law enforcement.

Beyond education, some technologies can monitor the various day-to-day interactions that customers have with banks that, along with verifying the legitimacy, offer “subtle messaging” and understanding about why transactions are taking place. That can introduce an appropriate level of friction, with the aid of artificial intelligence and other advanced tech, he said.

Such anti-fraud measures are becoming a key expectation of customers. PYMNTS and Featurespace found that 59% of scam victims select fraud detection and monitoring technologies as the most important safeguard.

The use of adaptive behavioral analytics offers a dual advantage, he said. The friction may not be introduced all the time, but customers have the reassurance that when something out of the ordinary happens, the bank will step in to make sure they’re safe.

A large wire transfer might be in motion as a consumer buys a house, for example. Is the bank aware of that process rather than simply stepping up friction because of the size of the transaction? Featurespace, which uses machine learning and real-time analytics to analyze consumer and payment behavior, can offer context to the bank and show how to “treat” that transaction, he said.

“You do want that extra level of assurance that the bank can provide,” Excell told Webster.

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