Top 6 Fraud Trends that Affected Online Businesses in 2024

Fraud continues to pose a serious challenge for businesses worldwide. In 2024, nearly 60% of financial institutions, including banks, fintechs, and credit unions, reported losing over $500,000 each in direct fraud losses.

More than a quarter of these organizations faced losses exceeding $1 million per company. Beyond these figures, indirect costs such as investigation expenses, customer attrition, and reputational damage compounded the financial burden.

A Rising Threat for Clients and Service Providers

Fraud affects both businesses and customers alike. Over the past year, two-thirds of organizations experienced an increase in fraud targeting consumer accounts, while just over half saw a rise in fraud attempts on business accounts.

These trends highlight the growing sophistication and frequency of fraud tactics. It results in the need for a stronger focus on fraud prevention.

Application Fraud Emerges as the Most Widespread Scam Worldwide

Among various threats, Authorized Push Payment (APP) fraud emerged as the leading type of fraud globally.

Enabled by advancements in AI, fraudsters executed highly sophisticated social engineering scams, manipulating individuals into authorizing payments to fraudulent accounts.

APP fraud accounted for 22% of reported cases, making it the most prevalent fraud type by case volume. However, businesses also faced other significant fraud trends throughout the year.

Phone Scammers

Phone scammers rely on social engineering to deceive victims into revealing personal or financial information.

Impersonating bank officials or government representatives, these fraudsters exploit public trust and the vast amount of personal data available online.

Why Phone Scams Happen

Access to personal information through social media and online databases allows scammers to craft convincing narratives, making their tactics highly effective. This fact makes them hard to detect.

Tips to Detect and Prevent Phone Scammers:

• Constant training: Educate employees and customers about common phone scams and warning signs, such as unsolicited requests for sensitive information.
• Robust techniques: Utilize call-blocking and screening technology to filter out known scam numbers.
• Incidents monitoring: Report suspicious calls to authorities to aid in their tracking and mitigation.

Account Takeover Fraud

This type of fraud saw a significant 24% rise in 2024. Account takeover occurs when criminals gain unauthorized access to user accounts by stealing login credentials through phishing, malware, or social engineering tactics.

Why Account Takeovers Happen

Weak passwords and advancements in phishing and malware techniques make it easier for fraudsters to compromise accounts.

Tips to Detect and Prevent Account Takeovers:

• MFA approach: Implement multi-factor authentication (MFA) for additional safety.
• Session tracking: Monitor account activity for irregular login attempts or unauthorized changes.
• User training: Educate users about strong password practices and the risks of clicking on suspicious links.
• Detection tools: Use anomaly detection systems to flag unusual behavior, such as logins from unfamiliar locations.

Synthetic Identity Theft

Synthetic identity fraud affected 1 of 3 users in 2024 resulting in average $1,600 loss per victim.

It involves creating fake identities using a combination of real and fabricated information to open new accounts or exploit existing ones.

Why Synthetic Identity Theft Happens

Traditional authentication methods often fail to detect synthetic identities, making this approach appealing to fraudsters.

Tips to Detect and Prevent Synthetic Identity Theft:

• Proper authentication: Adopt advanced identity authentication technologies, including biometrics and behavior analysis.
• Access safety: Employ multi-factor authentication to enhance account access safety.
• Account monitoring: Continuously monitor accounts for unusual behavior or patterns.

Application Fraud

Application fraud involves providing false information on financial applications to secure loans, credit, or benefits illegitimately.

Why Application Fraud Happens

Fraudsters are drawn to application fraud due to its potential for significant financial gain.

Tips to Detect and Prevent Application Fraud:

• Multi-layered authentication: Verify applicant identities using documentation, biometrics, and personalized questions.
• Advanced monitoring: Leverage fraud detection tools to identify irregularities in applications.
• Background checks: Conduct thorough background checks on applicants.
• Staff training: Train staff to recognize signs of fraudulent applications and verify questionable submissions.

Application-to-Person (A2P) Fraud

A2P fraud involves using applications to send malicious messages, such as phishing attempts or malware, to mobile devices.

Why A2P Fraud Happens

The widespread use of mobile devices and applications creates numerous opportunities for fraudsters to exploit vulnerabilities.

Tips to Detect and Prevent A2P Fraud:

• Legitimacy check: Implement robust authentication measures to verify the legitimacy of senders.
• Traffic tracking: Monitor message traffic for anomalies or unexpected spikes.
• ML technologies: Use machine learning tools to detect and block suspicious messages.
• App updates: Regularly update applications to address safety vulnerabilities.

Data Breaches

In 2024, data breaches reached 422 million of records. This type of fraud occurs when unauthorized individuals gain access to sensitive information, such as personal data or business secrets, through hacking or other means.

Why Data Breaches Happen

The interconnectedness of systems and the availability of data on black markets increase the risk of breaches.

Tips to Detect and Prevent Data Breaches:

• Strict safety protocols: Employ stringent safety protocols, such as access controls and network monitoring, to detect unauthorized access attempts.
• System audits: Regularly audit systems for vulnerabilities and address them promptly.
• Advanced detection: Use intrusion detection systems to identify and mitigate unauthorized activities.
• Staff training: Educate employees on creating strong passwords, safeguarding sensitive data, and identifying potential threats.

The Bottom Line

The fraud landscape in 2024 underscores the importance of proactive measures to safeguard businesses and customers. By staying informed about evolving fraud tactics and implementing robust prevention strategies, organizations can reduce risks and protect their assets effectively.

FAQs

What are the key fraud trends businesses faced in 2024?

The main fraud trends include Authorized Push Payment (APP) fraud, phone scams, account takeover fraud, synthetic identity theft, application fraud, Application-to-Person (A2P) fraud, and data breaches.

Why is Authorized Push Payment (APP) fraud so prevalent?

APP fraud thrives due to advancements in AI, enabling fraudsters to execute sophisticated social engineering scams. It accounts for 22% of reported fraud cases globally.

How can organizations prevent account takeover fraud?

Key strategies include implementing multi-factor authentication, monitoring account activity for irregularities, educating users about phishing risks, and deploying anomaly detection systems.

What steps can businesses take to reduce the risk of data breaches?

Organizations should enforce strict safety protocols, conduct regular system audits, use intrusion detection systems, and train employees to safeguard sensitive information.