Four Ways Credit Unions Can Fight the Newest Fraud Threat
By Cameron Huddleston, Editor at Large, Carefull
January 15, 2025
Just when efforts to combat fraud seemed to be paying off, fraudsters found a way around financial institutions’ defenses. Bad actors have shifted from targeting digital transactions, which financial institutions (Fs) have heavily invested in protecting, to manipulating a more vulnerable entry point – account holders, according to The State of Fraud and Financial Crime in the U.S. 2024 report by PYMNTS Intelligence.
Financial institutions, including credit unions, lost 121% more to scams that deceived consumers in 2024 than in 2023 in terms of the share of total dollars lost to fraud, according to the report. In fact, scams are now the most common form of fraud.
The PYMNTS Intelligence report highlights the challenges and opportunities in addressing this evolving fraud landscape. Here are the key takeaways and actionable insights for credit unions to bolster their fraud prevention strategies in 2025.
1. Address the shift to social engineering tactics.
Bad actors have increasingly moved away from digital payment fraud to more sophisticated social engineering tactics. These scams exploit the trust of your members, tricking them into sending funds or providing access to their accounts. The report reveals that scams now account for 23% of all fraudulent transactions, with a 56% increase in the share of fraudulent transactions stemming from scams over the past year.
Credit unions should prioritize educating their members about the risks of social engineering scams. Raising awareness is the first step in reducing the risk that members will fall for scammers’ tactics.
2. Prioritize behavioral analytics to mitigate losses.
The financial impact of fraud has grown significantly, with 40% of FIs reporting an increase in dollar losses due to fraud in the last 12 months. And 38% of FIs reported an increase in the volume of fraudulent transactions in that time frame, underscoring the need for more effective fraud prevention measures.
To combat the evolving tactics of fraudsters, many FIs are turning to newer anti-fraud technologies. The report highlights that 26% of FIs implemented behavioral analytics in the past year, and 76% are either in the process of adding new technologies or planning to do so in the next year.
Investing in advanced fraud detection technologies, such as behavioral analytics and fraud scores (a new screening tool that leverages transaction datasets), can help credit unions mitigate financial losses and protect their members.
3. Recognize the ROI on innovative technologies.
The report notes that 83% of FIs cite cost as a factor that makes it difficult to upgrade their fraud prevention solutions. While the cost of innovation remains a barrier, the increasing losses due to fraud highlight the return on investment of sophisticated fraud detection tools.
Credit unions should evaluate the long-term benefits of investing in advanced fraud prevention technologies and seek cost-effective solutions that offer robust protection against evolving fraud tactics, such as market-ready AI-driven solutions.
4. Enhance member trust and satisfaction.
The report emphasizes the importance of protecting members from social engineering scams to maintain their trust and satisfaction. Only 44% of FIs are willing to reimburse scam victims, which can harm member relationships.
Credit unions should develop comprehensive fraud response strategies that include member reimbursement policies and proactive communication to maintain member trust and loyalty.
Bottom Line
As fraudsters continue to adapt and evolve their tactics, credit unions must stay vigilant and proactive in their fraud prevention efforts. By investing in advanced fraud detection technologies, credit unions can stay ahead of bad actors and better protect their members.
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About Carefull
Carefull is a PRT (protect/retain/transfer) service for credit unions purpose-built to protect older members, retain deposits, and bridge to the next generation ahead of wealth transfer. It is the first and only digital platform designed to help credit unions protect the daily finances of seniors while assisting the adult children who often support them.