SVB’s and Signature Bank’s collapses were the second and third largest in U.S. history. Still, the unique nature of our economic climate and available data don’t offer a clear answer to the recession question.
Regardless of whether the economy reaches what some consider the technical definition of a recession (“two consecutive quarters of a generally slowing economy”).
Economic downturns can lead to significant shifts for businesses, such as changes in regulations, markets, or customer behavior. These changes can create new opportunities for fraudsters to exploit vulnerabilities in the system. In addition, companies tend to reduce their monitoring and supervision of potential fraud due to budget cuts or staff reductions. This reduced monitoring can provide an opportunity for fraudsters to engage in fraudulent activities undetected.
“When the economy goes down, fraud goes up.” We hear this mantra quite regularly from our customer base, and the data from past economic slowdowns supports this.
In 2009, the FBI reported a 22% increase in online fraud, with the number of complaints jumping to 336,655 in 2009 (compared to 206,884 in 2007 and 275,284 in 2008). This number spiked again at the onset of the pandemic: Annual online fraud complaints to the FBI increased 69% from 2019 to 2020, with total reported losses exceeding $4.2 billion.
In times of economic uncertainty, fraud detection becomes revenue protection. Risk and operations teams use aggressive fraud prevention measures to protect their organizations from fraud, credit abuse, and reputational damage.
Fraudsters game the system, and it hurts businesses in a number of ways. Here’s how.
Financial and economic uncertainties create opportunities for fraudsters to obtain money or assets illegally. They use the unpredictability and precariousness of these circumstances to mislead financial institutions with false information about their identity or financial circumstances. A popular method for these crimes is document fraud, because less than 10% of it is visible to the human eye. Fraudsters will make adjustments to names, account numbers, balances, and transactions that can't be seen.
When companies don’t proactively adjust and prioritize their fraud detection strategy, they are forced to be reactive when a fraud event does occur. This typically results in adding additional headcount to manually inspect and address potential instances of fraud. In the case of document fraud, more manual reviewers are added to processes like account opening and underwriting. But manual document reviews are slow and error-prone, leading to yet another problem for financial institutions.
Buyers everywhere are now accustomed to frictionless interactions, and they expect instant gratification. In fact, fast response times are now the most important attribute of customer experience. But companies that don’t prioritize fraud detection often force potential customers to wait days or even weeks to hear back. They often rely on outdated manual review processes instead of cutting-edge fraud detection technology. And when customers don’t get the near-instant responses they want, they’ll seek out alternative or even competitive solutions.
Fraudsters no longer need to visit the dark web to learn about a company’s potential weak spots. They eagerly share the best fraud tips and tactics on social platforms like Reddit, TikTok, and Telegram. So if a fraudster successfully cheats a company out of money, you can bet that others will find out and try to exploit that organization themselves. The financial losses (and reputational damage) from fraudulent activities can be even more challenging to recover from during uncertain economic times.
The tactics fraudsters use are always evolving — but so are the strategies and solutions used to thwart them. Companies that foster a culture of fraud prevention can identify new fraud tactics and quickly implement tools and techniques to thwart them.
At Inscribe, we help our customers stay ahead of fraudsters by using the most sophisticated AI models in the industry. Unlike other fraud vendors focused on emails, device info, or transactions, Inscribe is dedicated to fighting document fraud.
We combine the latest AI methods with analysis on 6M+ documents to provide the most reliable and cost-effective solution in the market. Because we’ve spent years working with such a wide range of customers, we have the largest document network in the industry.
As a result, our customers can protect both their revenue and reputation by …
Fraud detection is important in any economic climate — but during times of economic uncertainty, it becomes even more critical for companies to remain vigilant and take proactive steps to protect themselves. The companies who do are not only able to protect their reputation and revenue, but they win the market by being an institution that customers trust.
Inscribe helps companies fight document fraud with AI. Risk and ops teams who use Inscribe detect fraud that’s invisible to the human eye — enabling them to automate manual document reviews and onboard customers faster. Want to learn more? Reach out to speak with an expert from our team.