Fraud is a serious and persistent issue across the financial services sector and no one is immune from those who wish to part us from our money. The incentives (and rewards) for bad actors are too compelling and they follow customers across all of their financial journeys, from the doorstep to the branch to ATMS and, increasingly, into our digital lives.
The industry continues to respond and evolve with changes in the sector and it is a challenge with no endpoint. We are all, of course, vulnerable to fraud and deceit but that risk increases with age. According to research done by AgeUK, older people are over represented as victims of fraud and almost 5 million older people (65+) believe they have been targeted. The UK is not unique and some 5 million older Americans are financially exploited every year, with financial losses of around $37 billion annually.
From phone scams to doorstep fraudsters, elder financial exploitation takes many forms and involves products across retail banking, investment, pensions and beyond. One alarming statistics from a US study is that 60 percent of cases involve a perpetrator who is a family member, making the complexities of detecting and prosecuting even more challenging.
Although elderly people are over represented in the statistics, it is not ageing alone that increases susceptibility to financial fraud. A vulnerable customer, defined by the FCA as ‘someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.’ could be someone experiencing mental health issues, illness, bereavement, social/economic isolation and a whole host of other difficulties.
Elderly people hold a lifetime of accumulated assets and wealth – pensions, savings, homes, and are also lucrative targets. In the UK, £43 million has been lost to pension plan scams in the last four years, scammers no doubt incentivized by the pension freedoms introduced in April 2015.
There is also the undeniable fact that in some cases cognitive decline can make older people prime targets for criminal activity. Financial services is a complex beast and involves ongoing trust, assessment and decision-making. A decrease in cognitive abilities impacts all of those processes. If you throw in the challenges around security and identity in the digital world you start to get a sense of the scale of the task.
Banks, in particular, are on the frontlines of elder financial exploitation and need to do more to protect and detect fraud. There is so much more that can be done through policy, processes, products and staff training to help tackle the kind of crime that, although financial, has deleterious affects on health and wellbeing that far exceeds the initial cost.
Bankers are often the first to recognize the signs of fraud or financial exploitation,” said Larry Santucci, who follows the issue for the Federal Reserve Bank of Philadelphia. Unexplained withdrawals, wire transfers or debit transactions, certain transfers to new accounts or checks issued to new and unusual recipients can all be tell-tale behaviors, he said.
Thinking about those behaviours and access to transaction histories and data, fintech companies have a real opportunity to bring their technological expertise and understanding of the customer front and centre and help financial institutions to fight and protect customers from elder financial exploitation. Eversafe and Trulink (in the US) are using technology to do just that – detecting and alerting a trusted third party about changes in activity or unusual transactions.
Here in the UK, Kalgera (who will be presenting at FinTECH4Life on 15 May), leverages Open Banking APIs and advanced cognitive neurology techniques to aggregate transaction data in order to detect signs of vulnerability.
As fintech veterans of many years, we know that there is so much more to be done and a lot more innovation to come. In the context of greater longevity, a growing market is crying out for more fintech innovators to take of the challenge of protecting the sector, and particularly the more vulnerable, from the crushing affects of financial fraud.