Retail banking fraudsters steal billions of dollars annually, hurting banks and customers. Learn how banks detect fraud and improve customer service.

Janet was a new employee at the local hospital, and she was new to her small town. She received her first paycheck and deposited it into her bank account via her mobile deposit app. A week later, she went to a local bank, which agreed to cash the check for her because the hospital was a customer. At the end of the day, when they realized the check was invalid because it had already been processed at a different bank, it was too late.

Amy was also a new employee at the same hospital. She received her first paycheck, which the corporate office generated and then printed in-house on check paper. Promptly, she went to her bank and deposited the check into her account. Afterward, she contacted the payroll manager, said her bank wouldn’t accept the check, and asked whether another one could be printed. The payroll manager was wise to her attempt and refused to print her another check.

These women attempted the most common type of retail banking fraud, which is check fraud. While Janet succeeded, Amy did not. In 2018, 60% of all attempted fraud was check fraud, and 91% of the attempts were stopped by the prevention measures that were in place at banks.

What is retail banking fraud?

Retail banking fraud is basically any type of fraud committed against a banking institution. It is attempted in a variety of ways, and as more online banking appears in today’s digital world, more attempts are happening online than ever before.

It is important to understand the types of retail banking fraud that are happening, as well as keep up with new types of fraud as they emerge. Fraud prevention is an ever-changing necessity in the banking world.

Types of retail banking fraud

The various types of retail banking fraud include the following:

Check fraud accounted for 47% of retail banking fraud in 2018, at a cost of $1.3 billion. The most common attempts at check fraud included forged signatures, counterfeit checks and return deposited items.

Debit card fraud accounted for 44% of losses in 2018, for a total of $1.2 billion. If we break it down further by type, the percentage of fraud using counterfeit cards went down (25% of loss in 2018 compared to 47% in 2016), while fraud related to card-not-present transactions increased (42% of loss in 2018 compared to 30% in 2016.)

Electronic banking transactions accounted for the remaining 9% of banking fraud committed in 2018. These fraudulent online transactions totaled $265 million. When we talk about electronic/online banking transactions, we’re referring to things like bill pay transactions, peer-to-peer (P2P) transfers, wire transfers and ACH transactions.

Be aware of additional fraud attempts

In addition to the retail banking fraud types discussed above, it’s also important to be aware of the various schemes fraudsters are using in their attempts to manipulate consumers.

The variety of scams in our world include elder financial abuse, social media schemes to trick people into being money mules, fake check scams, phishing emails in which fraudsters pretend to represent a company the customer trusts, gas pump skimming and more.

Tips for consumer protection against fraud

One of the best ways to prevent fraud is to educate consumers. If banking customers are wise to potential fraudsters, they can stop the fraudulent behavior before it even has a chance to happen. Being aware of phone calls and emails received and online account password strength and security are simple ways to help prevent fraud from a customer’s standpoint.

A few other tips include:

  1. Don’t share sensitive information online or by phone. This includes your Social Security number, account numbers, login information, etc.
  2. Monitor your bank accounts on a regular basis to make sure all transactions are valid. If you find anything questionable, contact your bank right away.
  3. Lock your mobile phone, tablets, etc. for security so if your phone is lost or stolen, no one can access your information.
  4. Don’t click on links in emails you receive to log in to your online accounts. Go directly to the company website to log in.
  5. Use two-factor authentication for your online accounts as an extra security precaution.

How banks can detect fraud

According to the American Bankers Association, attempted fraud against deposit accounts in 2018 reached $25.1 billion. Of those attempts, American banks prevented $22.3 billion. That means that due to the fraud prevention measures our financial institutions have in place, almost $9 out of every $10 in attempted fraud was prevented.

If you are a financial institution and need help transforming for the digital age, this post is a great place to start. This 12-step guide helps you identify the urgent problems in your organization, choose your provider, proceed into testing and production phases, analyze your results and create a plan to move forward.

A variety of solutions are available for retail banking to help detect fraudulent behavior. In addition, with the use of AI-enhanced data systems, banks can make better and faster decisions to address potential fraud. This includes protection from account takeover, payment fraud, insider threats, credit and loan fraud, and more.

It’s important to make sure you’re protected. Effective prevention measures are one of the best ways to fight retail banking fraud.

To learn more about bank fraud prevention solutions, click here to speak with a specialist.