AI and Mobile Security: UK’s Response to Fraud in Financial Services

August 25, 2023

Today, global fraud is at a critically high level. The challenges posed by a combination of market volatility accelerated digital transformation, and consumer vulnerability are being exploited by fraudsters more than ever. In this article, we’ll discuss current fraud rates in the UK and globally and look at what financial service providers can do to improve the situation.

Cybercrime in the UK

Along with other countries, the UK has seen a significant increase in online fraud attacks, with the volume almost doubling in 2022, according to a recent analysis by LexisNexis Risk Solutions. Let’s look at the current statistics. 

The study established that there were roughly 36 million human-initiated fraudulent attacks launched in the UK in 2022, an increase of 92% from the previous year. In comparison, the global growth rate was 56%. 

There has also been a significant increase in automated bot attacks. In 2022, UK targets experienced 352 million bot attacks, which is an 81% increase compared to 2021. These bot attacks accounted for approximately 2% of all online transactions in the UK. 

Modern attacks, both human- and bot-initiated, are characterised by complex algorithms and advanced scripts and encompass a variety of cyber threats such as website disruption, phishing attempts, and smishing attacks aimed at stealing data.

If you want to learn about how the UK combats financial cybercrime, explore our article on the fight against fraud in the UK.

The UK Has a Lower Success Rate of Fraud Attacks Than the Rest of the World

Let’s start with the good news for the UK financial services sector. The success rate of fraud attacks in the UK is lower than it is globally, with 0.2% of attacks being successful out of total transactions, compared to 1.3% globally. The UK’s highly developed financial services market invests billions each year in advanced fraud prevention technology solutions, which helps to reduce the level of attacks. 

And there is even more good news. The widespread adoption of internet banking services using mobile devices and apps has also played a crucial role in reducing the number of successful fraud attempts targeting UK customers. Almost 88% of financial service transactions in the UK are conducted via mobile devices, with 89% of these being via apps. 

The dominant category of fraud attacks in the UK was scams. They accounted for 38.2% of all fraud attacks, followed by first-party fraud at 29.3% and third-party account takeover fraud at 13%. Moreover, the emergence of new types of fraud emphasises the need for continued attention and improved security measures. Other types of cybercrime, like first-party fraud, are currently a major problem in the UK. 

Despite the rise in overall fraud volumes, the technologically advanced fraud prevention methods implemented across the UK have been successful in countering fraud attempts, such as large-scale third-party fraud, which is causing substantial damage elsewhere in the world. 

The Impact of Fraud on the Financial Industry in the UK

The financial sector in the UK is taking major steps to minimise the impact of fraud on its clients by introducing artificial intelligence-based fraud analysis, collaborative analytics, shared intelligence, and secure mobile and app-based channels for online services.

These measures are expected to result in an increase in trusted customer traffic, which can be quickly authenticated. As financial organisations can identify their loyal customer base and track people’s use of online services, banks receive more capabilities to focus on identifying and preventing malicious traffic. However, although the news is positive, businesses can’t afford to become complacent.

How UK Financial Regulators Are Responding to AI-Driven Fraud

The Financial Conduct Authority (FCA), the UK’s financial services regulator, has issued a warning to banks to address the growing risk of fraud using artificial intelligence. FCA director general Nikhil Rathi emphasised the importance of mitigating cyber risk and fraud, as the number is likely to increase. He cited the case of financial campaigner Martin Lewis, who recently alerted his subscribers to a viral deepfake video created using AI technology and promoting a fraudulent investment scheme. 

Rathi recognised that AI technology itself could be used to fight crime, including fraud and money laundering, more effectively and at scale. However, he emphasised the need for accelerated investment in fraud prevention, operational resilience, and cyber resilience as AI adoption increases. 

The FCA is committed to supporting useful innovation while providing protection. The call for greater protection against AI fraud comes amid Prime Minister Rishi Sunak’s announcement that the UK should become the global centre for AI regulation. Financial service companies are being urged to strengthen their cyber competencies and capabilities to detect and neutralise cyberattacks. The focus should shift from protecting end-to-end processes to protecting and authenticating digital interactions between people and companies.

Secure Your Money with Payrow

Research shows that banking systems and financial service providers are vulnerable to several types of fraud, so there’s a need for improved security measures. Additionally, the use of artificial intelligence could also trigger an increase in fraud in the financial industry. Investment in fraud prevention and cyber resilience will need to accelerate to offset the gaps and risks created by cyberattacks and fraudsters. 

Overall, implementing effective security protocols is critical to mitigating the risks associated with cybercrime. At Payrow, we have implemented an advanced 3D Secure authentication protocol that will make transactions safe and safeguard your and your clients’ funds.

What’s more, Payrow offers a wide range of services to help improve your business strategy by reducing costs and simplifying administrative tasks. Our team provides comprehensive support to clients at all stages of business development.

Unlock your business growth potential with Payrow!

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