Staying ahead of fraud’s relentless evolution

U.S. President Joe Biden raised eyebrows last year when he said we’ll see more technology-led change in the next 10 years than we have in the past 50 years1. Time will tell if this is accurate, but, no matter the pace of innovation, fraudsters will constantly look to exploit new and emerging technologies.

Today, criminals have access to more data, tools and technologies than ever before, and they innovate rapidly. They test, learn and harness technology to probe the vulnerabilities of the digital ecosystem and its users. It’s a lucrative trade. According to a report by Moody’s2, the global cost of fraud is now $3.7 trillion per year.

How fraud has evolved

As the security provisions of financial institutions have become more sophisticated, from biometrics and multifactor authentication to AI-powered cybersecurity, fraud has become more diverse and dynamic. Fraudsters have adapted to the changing landscape of digital security and consumer behavior. Criminals have become skilled at evaluating where their actions expose them to the least risk and yield the highest return, and which fraud types are the most repeatable.

In recent years, we have seen a rise in different types of scams targeting people and businesses as the victims. There’s nothing new about the use of coercion and impersonation for criminal intent, but technology has enabled the industrialization of scams. Today, just one individual, based anywhere in the world, can send out millions of phishing texts and emails with the help of bots. A recent study suggests that half of all internet traffic3 now originates from bots.

Generative AI and deepfake technology allow for genuine websites to be easily replicated, imagery and audio of people you know to be impersonated, and social media data to be harvested at an industrial scale for social engineering.

The effect of all this is to erode trust throughout the digital ecosystem. Even when you recognize a text or an email address, should you click on the link? Should you accept that social media invite? Those discounted jeans look genuine, but should you buy them?

How to stay ahead

With criminals deploying emerging technologies, the onus is on us to use those same technologies for our collective defense and maintain trust. All organizations have a role to play, and through our position at the heart of the digital ecosystem, Mastercard is best positioned to be your partner of choice.

In this new era of fraud, digital identity solutions, like biometrics, are central to solving the challenge. We must avoid asking people to choose between convenience and security, and ultimately phase out static passwords and memorable personal details.

AI will continue to offer advances in fraud prevention and detection. By embedding next-generation AI techniques into real-time transaction risk assessment solutions like Mastercard’s Decision Intelligence and Consumer Fraud Risk, financial institutions can get ahead of the scammers and prevent more fraud in real time, before money ever leaves an account.

Finally, more data collaboration will be key in the fight against fraud. As we will explore in this Update, Mastercard is innovating with privacy-enhancing technologies (PETs) that allow data sharing between institutions without compromising the security or rights of the individuals to whom the data belongs.

No matter the speed of technology-led change over the next decade, the changing face of fraud motivates us to stay ahead of the fraudsters through cybersecurity innovation and engineering. Our goal is to defend the digital ecosystem and ensure digital payments remain trusted, safe and secure for everyone.