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Updated November 17th Related Posts Link to automotive form, business form
As Valentine’s Day approaches, hearts will melt, but some will inevitably be broken by romance scams. This season of love creates an opportune moment for scammers to prey on individuals feeling lonely or seeking connection. Financial institutions should take this time to warn customers about the heightened risks and encourage vigilance against fraud. In a tale as heart-wrenching as it is cautionary, a French woman named Anne was conned out of nearly $855,000 in a romance scam that lasted over a year. Believing she was communicating with Hollywood star Brad Pitt; Anne was manipulated by scammers who leveraged AI technology to impersonate the actor convincingly. Personalized messages, fabricated photos, and elaborate lies about financial needs made the scam seem credible. Anne’s story, though extreme, highlights the alarming prevalence and sophistication of romance scams in today’s digital age. According to the Federal Trade Commission (FTC), nearly 70,000 Americans reported romance scams in 2022, with losses totaling $1.3 billion—an average of $4,400 per victim. These scams, which play on victims’ emotions, are becoming increasingly common and devastating, targeting individuals of all ages and backgrounds. Financial institutions have a crucial role in protecting their customers from these schemes. The lifecycle of a romance scam Romance scams follow a consistent pattern: Feigned connection: Scammers create fake profiles on social media or dating platforms using attractive photos and minimal personal details. Building trust: Through lavish compliments, romantic conversations, and fabricated sob stories, scammers forge emotional bonds with their targets. Initial financial request: Once trust is established, the scammer asks for small financial favors, often citing emergencies. Escalation: Requests grow larger, with claims of dire situations such as medical emergencies or legal troubles. Disappearance: After draining the victim’s funds, the scammer vanishes, leaving emotional and financial devastation in their wake. Lloyds Banking Group reports that men made up 52% of romance scam victims in 2023, though women lost more on average (£9,083 vs. £5,145). Individuals aged 55-64 were the most susceptible, while those aged 65-74 faced the largest losses, averaging £13,123 per person. Techniques scammers use Romance scammers are experts in manipulation. Common tactics include: Fabricated sob stories: Claims of illness, injury, or imprisonment. Investment opportunities: Offers to “teach” victims about investing. Military or overseas scenarios: Excuses for avoiding in-person meetings. Gift and delivery scams: Requests for money to cover fake customs fees. How financial institutions can help Banks and financial institutions are on the frontlines of combating romance scams. By leveraging technology and adopting proactive measures, they can intercept fraud before it causes irreparable harm. 1. Customer education and awareness Conduct awareness campaigns to educate clients about common scam tactics. Provide tips on recognizing fake profiles and unsolicited requests. Share real-life stories, like Anne’s, to highlight the risks. 2. Advanced data capture solutions Implement systems that gather and analyze real-time customer data, such as IP addresses, browsing history, and device usage patterns. Use behavioral analytics to detect anomalies in customer actions, such as hesitation or rushed transactions, which may indicate stress or coercion. 3. AI and machine learning Utilize AI-driven tools to analyze vast datasets and identify suspicious patterns. Deploy daily adaptive models to keep up with emerging fraud trends. 4. Real-time fraud interception Establish rules and alerts to flag unusual transactions. Intervene with personalized messages before transfers occur, asking “Do you know and trust this person?” Block transactions if fraud is suspected, ensuring customers’ funds are secure. Collaborating for greater impact Financial institutions cannot combat romance scams alone. Partnerships with social media platforms, AI companies, and law enforcement are essential. Social media companies must shut down fake profiles proactively, while regulatory frameworks should enable banks to share information about at-risk customers. Conclusion Romance scams exploit the most vulnerable aspects of human nature: the desire for love and connection. Stories like Anne’s underscore the emotional and financial toll these scams take on victims. However, with robust technological solutions and proactive measures, financial institutions can play a pivotal role in protecting their customers. By staying ahead of fraud trends and educating clients, banks can ensure that the pursuit of love remains a source of joy, not heartbreak. Learn more
As data breaches become an ever-growing threat to businesses, the role of employees in maintaining cybersecurity has never been more critical. Did you know that 82% of data breaches involve the human element1 , such as phishing, stolen credentials, or social engineering tactics? These statistics reveal a direct connection between employee identity theft and business vulnerabilities. In this blog, we’ll explore why protecting your employees’ identities is essential to reducing data breach risk, how employee-focused identity protection programs, and specifically employee identity protection, improve both cybersecurity and employee engagement, and how businesses can implement comprehensive solutions to safeguard sensitive data and enhance overall workforce well-being. The Rising Challenge: Data Breaches and Employee Identity Theft The past few years have seen an exponential rise in data breaches. According to the Identity Theft Resource Center, there were 1,571 data compromises in the first half of 2024, impacting more than 1.1 billion individuals – a 490% increase year over year2. A staggering proportion of these breaches originated from compromised employee credentials or phishing attacks. Explore Experian's Employee Benefits Solutions The Link Between Employee Identity Theft and Cybersecurity Risks Phishing and Social EngineeringPhishing attacks remain one of the top strategies used by cybercriminals. These attacks often target employees by exploiting personal information stolen through identity theft. For example, a cybercriminal who gains access to an employee's compromised email or social accounts can use this information to craft realistic phishing messages, tricking them into divulging sensitive company credentials. Compromised Credentials as Entry PointsCompromised employee credentials were responsible for 16% of breaches and were the costliest attack vector, averaging $4.5 million per breach3. When an employee’s identity is stolen, it can give hackers a direct line to your company’s network, jeopardizing sensitive data and infrastructure. The Cost of DowntimeBeyond the financial impact, data breaches disrupt operations, erode customer trust, and harm your brand. For businesses, the average downtime from a breach can last several weeks – time that could otherwise be spent growing revenue and serving clients. Why Businesses Need to Prioritize Employee Identity Protection Protecting employee identities isn’t just a personal benefit – it’s a strategic business decision. Here are three reasons why identity protection for employees is essential to your cybersecurity strategy: 1. Mitigate Human Risk in Cybersecurity Employee mistakes, often resulting from phishing scams or misuse of credentials, are a leading cause of breaches. By equipping employees with identity protection services, businesses can significantly reduce the likelihood of stolen information being exploited by fraudsters and cybercriminals. 2. Boost Employee Engagement and Financial Wellness Providing identity protection as part of an employee benefits package signals that you value your workforce’s security and well-being. Beyond cybersecurity, offering such protections can enhance employee loyalty, reduce stress, and improve productivity. Employers who pair identity protection with financial wellness tools can empower employees to monitor their credit, secure their finances, and protect against fraud, all of which contribute to a more engaged workforce. 3. Enhance Your Brand Reputation A company’s cybersecurity practices are increasingly scrutinized by customers, stakeholders, and regulators. When you demonstrate that you prioritize not just protecting your business, but also safeguarding your employees’ identities, you position your brand as a leader in security and trustworthiness. Practical Strategies to Protect Employee Identities and Reduce Data Breach Risk How can businesses take actionable steps to mitigate risks and protect their employees? Here are some best practices: Offer Comprehensive Identity Protection Solutions A robust identity protection program should include: Real-time monitoring for identity theft Alerts for suspicious activity on personal accounts Data and device protection to protect personal information and devices from identity theft, hacking and other online threats Fraud resolution services for affected employees Credit monitoring and financial wellness tools Leading providers like Experian offer customizable employee benefits packages that provide proactive identity protection, empowering employees to detect and resolve potential risks before they escalate. Invest in Employee Education and Training Cybersecurity is only as strong as your least-informed employee. Provide regular training sessions and provide resources to help employees recognize phishing scams, understand the importance of password hygiene, and learn how to avoid oversharing personal data online. Implement Multi-Factor Authentication (MFA) MFA adds an extra layer of security, requiring employees to verify their identity using multiple credentials before accessing sensitive systems. This can drastically reduce the risk of compromised credentials being misused. Partner with a Trusted Identity Protection Provider Experian’s suite of employee benefits solutions combines identity protection with financial wellness tools, helping your employees stay secure while also boosting their financial confidence. Only Experian can offer these integrated solutions with unparalleled expertise in both identity protection and credit monitoring. Conclusion: Identity Protection is the Cornerstone of Cybersecurity The rising tide of data breaches means that businesses can no longer afford to overlook the role of employee identity in cybersecurity. By prioritizing identity protection for employees, organizations can reduce the risk of costly breaches and also create a safer, more engaged, and financially secure workforce. Ready to protect your employees and your business? Take the next step toward safeguarding your company’s future. Learn more about Experian’s employee benefits solutions to see how identity protection and financial wellness tools can transform your workplace security and employee engagement. Learn more 1 2024 Experian Data Breach Response Guide 2 Identity Theft Resource Center. H1 2024 Data Breach Analysis 3 2023 IBM Cost of a Data Breach Report
By: Tom Hannagan Apparently my last post on the role of risk management in the pricing of deposit services hit some nerve ends. That’s good. The industry needs its “nerve ends” tweaked after the dearth of effective risk management that contributed to the financial malaise of the last couple of years. Banks, or any business, can prosper by simply following their competitors’ marketing strategies and meeting or slightly undercutting their prices. The actions of competitors are an important piece of intelligence to consider, but not necessarily optimal for your bank to copy. One question is regarding the “how-to” behind risk-based pricing (RBP) of deposits. The answer has four parts. Let’s see. First, because of the importance and size of the deposit business (yes, it’s a line of business) as a funding source, one needs to isolate the interest rate risk. This is done by transfer pricing, or in a sense, crediting the deposit balances for their marginal value as an offset to borrowing funds. This transfer price has nothing to do with the earnings credit rate used in account analysis – that is a merchandising issue used to generate fee income. Fees, resulting from account analysis, when not waived, affect the profitability of deposit services, but are not a risk element. Two things are critical to the transfer of funding credit: 1) the assumptions regarding the duration, or reliability of the deposit balances and 2) the rate curve used to match the duration. Different types of deposit behave differently based on changes in rates paid. Checking account deposit funds tend to be very loyal or “sticky” – they don’t move around a lot (or easily) because of rate paid, if any. At the other extreme, time deposits tend to be very rate-sensitive and can move (in or out) for small incremental gains. Savings, money market and NOW accounts are in-between. Since deposits are an offset (ultimately) to marginal borrowing, just as loans might (ultimately) require marginal borrowing, we recommend using the same rate curve for both asset and liability transfer pricing. The money is the same thing on both sides of the balance sheet and the rate curve used to fund a loan or credit a deposit should be the same. We believe this will help, greatly, to isolate IRR. It is also seems more fair when explaining the concept to line management. Secondly, although there is essentially no credit risk associated with deposits, there is operational risk. Deposit make up most of the liability side of the balance sheet and therefore the lion’s share of institutional funding. Deposits are also a major source of operational expense. The mitigated operational risks such as physical security, backup processing arrangements, various kinds of insurance and catastrophe plans, are normal expenses of doing business and included in a bank’s financial statements. The costs need to be broken down by deposit category to get a picture of the risk-adjusted operating expenses. The third major consideration for analyzing risk-adjusted deposit profitability is its revenue contribution. Deposit-related fee income can be a very significant number and needs to be allocated to particular deposit category that generates this income. This is an important aspect of the return, along with the risk-adjusted funding value of the balances. It will vary substantially for various deposit types. Time deposits have essentially zero fee income, whereas checking accounts can produce significant revenues. The fourth major consideration is capital. There are unexpected losses associated with deposits that must be covered by risk-based capital – or equity. The unexpected losses include: unmitigated operational risks, any error in transfer pricing the market risk, and business or strategic risk. Although the unexpected losses associated with deposit products are substantially less than found in the lending products, they needs to be taken into account to have a fully risk-adjusted view. It is also necessary to be able to compare the risk-adjusted profit and profitability of such diverse services as found within banking. Enterprise risk management needs to consider all of the lines of business, and all of the products of the organization, on a risk-adjusted performance basis. Otherwise it is impossible to decide on the allocation of resources, including precious capital. Without this risk management view of deposits (just as with loans) it is impossible to price the services in a completely knowledgeable fashion. Good entity governance, asset and liability posturing, and competent line of business management, all require more and better risk-based profit considerations to be an important part of the intelligence used to optimally price deposits.
Meat and potatoes Data are the meat and potatoes of fraud detection. You can have the brightest and most capable statistical modeling team in the world. But if they have crappy data, they will build crappy models. Fraud prevention models, predictive scores, and decisioning strategies in general are only as good as the data upon which they are built. How do you measure data performance? If a key part of my fraud risk strategy deals with the ability to match a name with an address, for example, then I am going to be interested in overall coverage and match rate statistics. I will want to know basic metrics like how many records I have in my database with name and address populated. And how many addresses do I typically have for consumers? Just one, or many? I will want to know how often, on average, we are able to match a name with an address. It doesn’t do much good to tell you your name and address don’t match when, in reality, they do. With any fraud product, I will definitely want to know how often we can locate the consumer in the first place. If you send me a name, address, and social security number, what is the likelihood that I will be able to find that particular consumer in my database? This process of finding a consumer based on certain input data (such as name and address) is called pinning. If you have incomplete or stale data, your pin rate will undoubtedly suffer. And my fraud tool isn’t much good if I don’t recognize many of the people you are sending me. Data need to be fresh. Old and out-of-date information will hurt your strategies, often punishing good consumers. Let’s say I moved one year ago, but your address data are two-years old, what are the chances that you are going to be able to match my name and address? Stale data are yucky. Quality Data = WIN It is all too easy to focus on the more sexy aspects of fraud detection (such as predictive scoring, out of wallet questions, red flag rules, etc.) while ignoring the foundation upon which all of these strategies are built.
In a continuation of my previous entry, I’d like to take the concept of the first-mover and specifically discuss the relevance of this to the current bank card market. Here are some statistics to set the stage: • Q2 2009 bankcard origination levels are now at 54 percent of Q2 2008 levels • In Q2 2009, bankcard originations for subprime and deep-subprime were down 63 percent from Q2 2008 • New average limits for bank cards are down 19 percent in Q2 2009 from peak in Q3 2008 • Total unused limits continued to decline in Q3 2009, decreasing by $100 billion in Q3 2009 Clearly, the bank card market is experiencing a decline in credit supply, along with deterioration of credit performance and problematic delinquency trends, and yet in order to grow, lenders are currently determining the timing and manner in which to increase their presence in this market. In the following points, I’ll review just a few of the opportunities and risks inherent in each area that could dictate how this occurs. Lender chooses to be a first-mover: • Mining for gold – lenders currently have an opportunity to identify long-term profitable segments within larger segments of underserved consumers. Credit score trends show a number of lower-risk consumers falling to lower score tiers, and within this segment, there will be consumers who represent highly profitable relationships. Early movers have the opportunity to access these consumers with unrealized creditworthiness at their most receptive moment, and thus have the ability to achieve extraordinary profits in underserved segments. • Low acquisition costs – The lack of new credit flowing into the market would indicate a lack of competitiveness in the bank card acquisitions space. As such, a first-mover would likely incur lower acquisitions costs as consumers have fewer options and alternatives to consider. • Adverse selection – Given the high utilization rates of many consumers, lenders could face an abnormally high adverse selection issue, where a large number of the most risky consumers are likely to accept offers to access much needed credit – creating risk management issues. • Consumer loyalty – Whether through switching costs or loyalty incentives, first-movers have an opportunity to achieve retention benefits from the development of new client relationships in a vacant competitive space. Lender chooses to be a secondary or late-mover: • Reduced risk by allowing first-mover to experience growing pains before entry. The implementation of new acquisitions and risk-based pricing management techniques with new bank card legislation will not be perfected immediately. Second-movers will be able to read and react to the responses to first movers’ strategies (measuring delinquency levels in new subprime segments) and refine their pricing and policy approaches. • One of the most common first-mover advantages is the presence of switching costs by the customer. With minimal switching costs in place in the bank card industry, the ability for second-movers to deal with an incumbent is not one where switching costs are significant issues – second-movers would be able to steal market share with relative ease. • Cherry-picked opportunities – as noted above, many previously attractive consumers will have been engaged by the first-mover, challenging the second-mover to find remaining attractive segments within the market. For instance, economic deterioration has resulted in short-term joblessness for some consumers who might be strong credit risks, given the return of capacity to repay. Once these consumers are mined by the first-mover, the second-mover will likely incur greater costs to acquire these clients. Whether lenders choose to be first to market, or follow as a second-mover, there are profitable opportunities and risk management challenges associated with each strategy. Academics and bloggers continue to debate the merits of each, (1) but it is the ultimately lenders of today that will provide the proof. [1] http://www.fastcompany.com/magazine/38/cdu.html