So, let’s clear a few things up from the off. I’m no Nostradamus and not really one for making wild predictions. I’m not much of a betting man, and I don’t have the time or data to be able to do something heavily researched or based on a big chunk of quantitative input. So here are my predictions for fraud in 2021.
Actually, I tell a small lie (please forgive me), because I have only one, really.
Fraud will persist.
There you go. I hope you were sitting down for that. Whilst a little on the flippant side (not like me, I know!), I’m not sure it really matters about the specific areas in which we might see fraud. Any good fraud manager will know through instinct, that fraud will continue to evolve, migrate and pervade. And any good fraud team will be agile enough to flex to what they anticipate and see happening. If you put too much weight onto a prediction and get it wrong, you run the risk of misaligning your resources, and most fraud teams I know can’t afford to do that!
But does that mean we shouldn’t forecast?
I’m not really a big advocate of fraud loss forecasting. For the most part in my experience, fraud losses tend to mostly be stable, and I’m yet to be convinced that we can successfully spot some large event (like a pandemic) that might seriously impact losses coming down the line. Does that mean we shouldn’t try? I suppose that depends how accurately you can perform the analysis and what action you think you can or should take off the back of the forecast. If you forecast a reduction in losses will you have resources taken away? If you forecast a rise in fraud, will you be assigned more?!
Does that mean we can be certain of anything?
1. Evolution – we know fraud will continue to change over time. One fraud typology will continue to mutate so that those profiting from it can evade the efforts of the fraud teams. Fraud teams will run a continuous improvement cycle for their controls, constantly reviewing performance, detection rates and false positive rates. When changes to strategies are made, fraudsters will evolve their approaches so that they can continue to make their living.
2. Migration – fraudsters will continue to seek the weakest point that their assets can exploit. This could be within an industry, moving from one laggard to another, or it could be across industries. With the apparent ever-rising incidence of data breaches, there are assets out there to be sweated.
3. Pervasion – once fraudsters have found something that works for them they will either seek to maximise their returns in the short term with a broad attack, or they’ll look to maximise returns over the longer term by flying under the radar for longer. The latter tactic is most likely to be chosen by an fraudster internal to a company.
What can we do?
My suggestion, rather than trying to guess what may be next, is to invest in and practice the skill of fraud risk assessment. This is a tool that should be commonplace in all fraud management teams. By understanding the fraud risks to your business, your products, your customers, your processes and more, you can plan in a robust way and do your best to mitigate future risks out of the way you get things done. The more you can stay proactive, the more easily you should be able to pivot (if needed) when that proverbial ‘black swan’ comes swimming your way…
My final words go to those far more eloquent than me:
“Prophesy is a good line of business, but it is full of risks.”
Mark Twain
“To expect the unexpected shows a thoroughly modern intellect.”
Oscar Wilde
Here’s to a better 2021, whatever it may hold.
This article was originally published on LinkedIn and has been reproduced with the author’s permission.
