Banking fraud

Entersekt | Encyclopedia | Banking fraud
What is banking fraud?

Banking fraud refers to any unauthorized banking activities, such as check fraud, or online financial crime such as vishing, which result in financial losses and security risks for banking customers and businesses. These fraudulent activities can include attacks like identity theft, account takeover fraud, phishing scams or general unauthorized transactions. As consumers rely more and more on digital financial services, it has made digital banking fraud a pervasive threat. Consequently, financial institutions need strong, modern fraud prevention solutions to prevent modern banking fraud.

What are the main banking fraud types?

Banking fraud can occur in person, such as ATM fraud or a fraudster using a stolen check, or in digital banking, such as social engineering attacks or identity theft.

Phishing is a common example of digital banking fraud. Fraudsters attempt to deceive individuals into disclosing sensitive financial information, such as account credentials and personal details, by posing as a legitimate authority figure through fake websites or emails.

Account takeover is another form of online banking fraud. Cybercriminals gain unauthorized access to an individual's online banking account, often through stolen credentials or social engineering tactics, enabling them to make fraudulent transactions.

Identity theft is also a form of banking fraud. Criminals steal personal information to impersonate individuals, opening fraudulent accounts or conducting unauthorized transactions.

Fraudsters also make use of payment card fraud to access victims’ funds. This means unauthorized use or manipulation of payment card information for fraudulent transactions, including card skimming, card-not-present fraud, and counterfeit card usage.

What are the best banking fraud prevention options?

An optimum solution to reduce banking fraud would use real-time data to differentiate actual customers from financial criminals quickly without interrupting the user experience.

One banking fraud prevention solution many banks use is multi-factor authentication (MFA). Implementing MFA adds an extra layer of security by requiring additional verification steps, such as a one-time password sent to a mobile device, rather than relying on passwords only. Fraud prevention tools that also include context-based authentication provide an even more secure digital banking environment.

In addition to authentication tools, financial institutions also need solutions for fraud monitoring and alerts. Ideally, their platform utilizes real-time fraud monitoring and alert systems to detect suspicious activities and unauthorized transactions, enabling quick intervention.

Education and awareness are also important components in preventing banking fraud. Educating users about common fraud tactics, such as phishing scams and social engineering, empowers them to recognize potential threats and reduces the risk of them being manipulated by a fraudster.

Additional resources:


Banking fraud | Phishing | Account takeover (ATO) fraud