In the landscape of global finance, financial services are the linchpin for facilitating economic transactions and safeguarding consumer assets. Along with consumers’ growing expectations for digital technology, there are concerns for the rising rates of fraud. This threat not only jeopardizes the security of financial institutions but also presents substantial risks to consumers on a global scale.
According to Trustdecision.com, 22% of US adults have been victims of account takeovers, which amounts to over 24 million households. And 45% of consumers are not actively protecting themselves against cybercrime, according to the Telesign Trust Index.
Among all forms of fraudulent activities, social engineering fraud emerges as a particularly challenging threat. This tactic involves exploiting communication vulnerabilities to manipulate individuals into disclosing sensitive information or acting against their own interests online. From phishing emails to pretexting and impersonation schemes, fraudsters employ a diverse array of techniques to deceive victims.
In this article, we explore the challenges posed by social engineering fraud within the financial services industry and examine innovative solutions, such as silent verification, that are emerging to effectively combat it.
Understanding social engineering fraud
Social engineering fraud is a form of deception where fraudsters manipulate victims into divulging confidential information or carrying out fraudulent transactions, exploiting human psychology rather than relying on technological vulnerabilities. It includes a range of psychological tactics used by fraudsters to exploit innate human tendencies, including trust, authority, curiosity, or fear, to achieve their nefarious objectives. These tactics are crafted to deceive individuals into revealing sensitive information or undertaking actions that ultimately serve the interests of the fraudster.
Phishing attacks aimed at financial services customers are common. Fraudsters dispatch deceitful emails or text messages masquerading as legitimate messages from banks or financial institutions to coax recipients into clicking on malicious links or furnishing login credentials under false pretexts. These deceptive communications are often expertly crafted to mirror authentic correspondence, rendering them challenging for unsuspecting individuals to differentiate.
The challenges and costs of social engineering fraud in the financial services industry
The impact of social engineering fraud on the financial services industry is substantial. Significant challenges for institutions impacted by successful social engineering attempts include direct monetary harm, asset erosion, loss of customer trust, harm to a brand’s reputation, adverse media coverage, and reduced profitability. Furthermore, regulatory penalties imposed in reaction to social engineering fraud can exacerbate the difficulties and lead to fines, sanctions, and compliance obligations that place additional strain on resources and compromise operational efficiency.
Data breaches compound the threat landscape significantly. A recent 2024 study by PwC revealed that 36% of global companies experienced a data breach in the past three years, resulting in losses exceeding $1 million USD.
This underscores the need for robust cybersecurity measures and proactive risk management strategies to flag sign-in attempts informed by social engineering fraud for both financial institutions and consumers.
Leveraging silent verification to combat social engineering fraud
To effectively combat social engineering fraud, financial services companies must implement robust security measures. Unfortunately, a staggering 85% of US banks rely primarily on ineffective username and password protocols to authenticate customers, as revealed by the American Banking Association in 2022. This overreliance results in substantial operating costs, with each password reset averaging $70 for banks.
One promising strategy for addressing sign-in vulnerabilities involves the implementation of silent verification solutions. Silent verification is a form of multifactor authentication that does not require end-user interaction. It entails background authentication checks made directly with a mobile phone carrier to verify possession on transactions or sign-in attempts, adding an extra layer of security against fraudulent activities.
By harnessing advanced analytics and machine learning algorithms, financial institutions can discreetly assess the legitimacy of transactions and identify anomalies or suspicious patterns indicative of social engineering fraud.
The integration of silent verification solutions into existing authentication processes allows financial institutions to bolster security without sacrificing user experience or hindering transaction efficiency. By seamlessly verifying transaction authenticity in real-time, financial institutions can successfully thwart social engineering attacks and reduce the likelihood of financial losses, regulatory penalties, and reputational harm.
Silent verification solutions empower financial institutions to proactively detect and address emerging threats, adjust authentication protocols to counter evolving fraud tactics, and safeguard the integrity of the financial services ecosystem.
Strengthening digital security with data
Social engineering fraud poses significant challenges to the financial services industry. However, innovative solutions such as silent verification offer promising avenues for combating this threat. Financial services companies can strengthen their defenses against evolving fraud tactics by prioritizing proactive measures and embracing technological innovations.
Telesign offers multiple digital solutions to combat fraud, including silent verification checks on transactions without alerting users, and data-powered risk analysis to flag fraudulent sign-in attempts. Effectively enhance security by adding an extra layer of protection to thwart fraudulent activities while ensuring smooth user experiences.
With a comprehensive approach to security and leveraging technological advancements like those offered by Telesign, financial services companies can bolster their defenses against social engineering fraud, prioritize consumer safety, and uphold the trust and integrity of the global financial services sector.
Learn more about silent verification and how Telesign can help enable stronger fraud protection—explore our Financial Services hub today.
