Mobile banking offers consumers in Latin America unparalleled convenience: customers can check balances on the treadmill, pay poolside, and manage bills while in line. But this ease comes at a cost for financial institutions managing risk.
Using Brazil as an example, let’s explore the rising risk of fraud in the age of “distracted banking,” and how banks can protect their customers.
A study from Gupshup found that more than 75 percent of Brazilians shop online while watching TV, and PCMI notes that seven in 10 banking transactions are now mobile, mirroring the over 70 percent of online purchases made via smartphones.
While the ability to conduct financial activities while multitasking is certainly convenient, there’s evidence that fraudsters are exploiting Brazilians’ divided attention. Serasa reports three attempted financial scams per second in Brazil, many exploiting distracted banking or e-commerce shopping.
3 Steps for Optimizing Financial Fraud Detection Tools
Here are three of the most common scams in Brazil, all of which thrive on distraction.
A customer is watching a video on their phone when a message comes via WhatsApp claiming to be from their bank or a popular retailer offering an enticing discount or exclusive product, often under a limited-time deal, can bypass the customer’s usual caution, especially when they’re already distracted. These scams often make a common request for sensitive information or a link to a fake login page that an inattentive user might click, thereby exposing payment or personal data.
A customer receives a fake payment request from a fraudster impersonating a legitimate biller. If they view the fake bill while distracted–watching TV or eating at a restaurant, say–they can easily miss some tell-tale signs the bill is fraudulent, such as subtle differences in the company email address or another indication, because they aren’t fully focused on the details. The speed and convenience of digital payments means consumers are giving our bills less scrutiny, a habit fraudsters are taking advantage of.
A growing number of fraudulent practices take advantage of the speed and ease of instant payment tools such as Pix. In one scam, a customer receives an unknown deposit into a digital account, such as Pix, followed by a WhatsApp message from someone claiming to have sent this money by mistake, and asking for it back. Without paying close attention, the consumer may easily miss the fact the account provided isn’t the same as the one the money was sent from. The scammers then activate a refund mechanism to withdraw the initial deposit from the account, leaving the target down by that amount.
How banks can help
In light of these and other scams that rely on distracted banking, here are some ways banks can proactively help protect their customers.
Enhanced in-app security measures:
Implement multi-factor authentication that goes beyond simple passwords and SMS codes, such as biometrics and push notifications requiring user confirmation.
Provide in-app warnings and reminders about common scams, especially during transaction flows, which will help customers to double-check during quick purchases.
Proactive education and awareness campaigns
Offer short, engaging videos and infographics specifically addressing the risks of ‘distracted banking’ and how common scams exploit it.
Gamified financial literacy games, puzzles and other in-app features combined with rewards can incentivize better behaviours.
On social media, partnering with popular influencers with simple campaign messaging can help bring important anti-fraud updates and information to a wider audience.
User-friendly verification processes
Simplify and strengthen verification steps for critical actions (e.g., adding new Pix keys, making large transfers, using new devices) without adding excessive friction.
Offer easy ways for users to quickly verify the authenticity of communications claiming to be from the bank, such as empowering the user to set security words and phrases that the bank must use.
For banks in Brazil–and throughout LatAM–combating the rise of fraud that preys on distraction requires a multi-pronged approach, leveraging both increased user awareness and proactive measures from financial institutions.
Balancing Fraud Prevention and Customer Experience
By prioritizing user safety through designing intuitive, secure platforms and actively educating their customers about the dangers of inattentive financial activities, banks can take the lead in providing a safer digital banking environment for their customers, which in turn drives user confidence, loyalty, and long-term satisfaction.
Contact us to learn more about protecting your bank’s customers against fraud.
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