Fraud Risk Increases Alongside Digital Banking Expansion

During the COVID-19 pandemic, shelter-in-place orders and business’ reduced operating capacities have forced many individuals to rethink their routines. As people try to reduce in-person contact, the already increasing segment of customers using digital bank apps has surged. Currently, approximately 60% of customers use digital banking apps rather than visiting a bank’s physical location, according to PYMNTS.com, a site featuring information related to e-commerce and online payment methods.

The shift to digital banking may be a prudent choice for public health but it comes with different fraud risks than brick-and-mortar banking.

Growing Pains of Digital Banking

With an influx of first-time digital banking users, fraudsters and hackers have a multitude of new targets who may be unfamiliar with the platform. These new users, potentially unaware of online banking security protocols, can be especially susceptible to phishing attempts and phony communications.

Individuals and organizations transitioning to online banking services should keep in mind several precautions and security measures to protect their bank accounts from fraudsters.

  • While it is advisable to use a unique password for every online account, this is especially true for online banking. Using a repeated password can mean that one compromised website could give hackers access to bank accounts as well.
  • Do not follow links in unsolicited banking emails and verify any account service requests with a trusted bank phone number.
  • Avoid using public Wi-Fi for online banking. Instead use a password-protected home or office Wi-Fi, cellular data, or a VPN connection.
  • The best security when banking online is to use a clean computer that receives NO emails. Investing in a used, erased, and clean computer prevents and avoids the download of malware. An inexpensive investment of a cleaned, used computer goes a long way.

New Security Tools

Increased rates of cybercrime and fraud have led banks to increase their cybersecurity budgets and allocate more resources to security and customer service for online banking. With 53% of new users planning to continue banking digitally, according to PYMNTS.com, these decisions may prove crucial for the future of online banking. Some existing and planned measures include:

  • Two-factor authentication to provide an extra layer of security to prevent bad actors from using stolen information to access accounts.
  • Biometrics such as fingerprints, face recognition, and voice authentication to verify users’ identity.
  • Phishing reporting hotlines to verify communications and detect scams.

While these systemic improvements are promising, individual caution and prevention measures are critical for mitigating the risks that come with switching to online banking.

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