5 Fraud Prevention Trends for 2016
The end of the year is always a key time for businesses, with security ranking high on the list. With 2015 drawing to a close, it’s already time to begin thinking about fraud prevention in the new year. What will the fraud landscape look like for the next 365 days? Here are five trends to expect going into 2016:
- Look to online and mobile
As the transition to EMV continues, businesses can expect more fraud to occur online and on mobile devices. As companies cease to use the more easily compromised magnetic-strip cards, it will become more difficult for thieves to implement fraud at brick-and-mortar businesses. With point-of-sale systems more secure, fraudsters will begin to target different channels with weaker security. In Europe, which has been using chip-and-pin cards for many years, fraud navigated into card-not-present spaces once the EMV rollout was completed. Experts believe the same thing will likely happen in the U.S., although it may take a while for the trend to take form. Forrester predicted online fraud will probably increase around 55 percent over a period of three years.
In addition, PayPal Chief Risk Officer Tomer Barel predicted fraudsters will target mobile users more frequently in 2016. To fight hacks on mobile devices, users will need to become savvier and learn how to use the built-in capabilities of these platforms, such as fingerprint sensors. Currently, mobile devices are easy to hack simply because users fail to create strong passwords or change them when necessary. Another key to mobile security, according to Barel, will be to make these security features more user friendly to encourage adoption.
- Omnichannel shoppers
Retailers need to become accustomed to omnichannel customers. In other words, fraud detection services need to be able to work across different channels. A customer’s path to purchase usually includes multiple steps on different channels. For instance, a single customer may make a purchase online then in a brick-and-mortar store and later surf the website via a mobile device. Companies need to understand customer behavior across all of these channels to more effectively spot fraud. In addition, understanding how shoppers use unique channels will help businesses and financial institutions more accurately assess what can be defined as suspicious behavior. This will help companies more effectively target actual instances of fraud rather than annoying a customer who was making a legitimate purchase.
- Fraudsters will use social
Another trend PayPal’s Barel highlighted was that fraudsters will begin to use social media for their own nefarious needs. People engaging in fraud will become increasingly sophisticated, examining targets’ online activities to learn more about them and engineer automated schemes to collect additional information.
“The coming year is sure to see a level of automation and scale to these attacks that will continue to surprise us all,” Barel wrote.
Consumers will need to be more vigilant about the information they share on social networks to avoid falling victim to a scam. In addition, social networks may want to consider enhancing their own security mechanisms to avoid a mass breach that reveals user data. With multiple social platforms to choose from, consumers may cease to use a platform that allowed their sensitive information to be compromised.
- IoT security
The Internet of Things is picking up speed and will continue to do so throughout 2016. While connected devices make consumers lives easier in many ways, they also present serious security risks. As Wired pointed out, connected devices collect consumer information that could be valuable to fraudsters. For instance, a smart thermostat could reveal what rooms a family is most likely to spend time in and when. To achieve success in the IoT market, companies will need to adapt better strategies for fighting fraud and preventing hacks into consumer devices. Rather than simply enhance security on individual devices, companies need to secure their central servers to ensure a massive hack doesn’t occur.
- Advanced machine learning will take the driver’s seat
Gartner identified advanced machine learning as one of its top 10 strategic technology trends for the new year. As datasets grow bigger, it’s more difficult for companies to effectively analyze this information and draw conclusions. Advanced machine learning automates these tasks to make the process more effective and less time consuming. This technology will be important to many different important business issues, but fraud prevention will be one of the biggest applications, especially in light of the other security and fraud prevention trends moving into the new year. Tracking omnichannel customers and keeping an eye on data from social media and the IoT will all require enhanced security technology.
Fraudsters are always evolving, and businesses will need to find new ways to prevent fraudulent activities. Companies should keep these trends in mind as they prepare for next year.