Another word on Fraud

During the past few weeks, many reports highlighted the alarming growth in fraudulent transactions. Without having an authoritative body providing a holistic overview, it is unclear how big this problem is, but judging from these reports, it is probably huge:

1. UK payment association reports that online banking fraud grew 132% form 2007 to 2008. Most of this seems to be driven by phishing and Malware attacks.
2. The Association of Financial Professionals (AFP) of the US estimate that more than 70% of firms in the US were victims of attempted or actual payment fraud. While the majority of the fraud were check related, a large percentage were electronic payment fraud
3. Symantec announced that they detected a growth of 66% in phishing sites and 47% in active bots creating risks for electronic fraud
4. Gartner reports that more than five million Americans lost money because of electronic fraud during the 12 months ending September 2008
5. The Australian Bureau of Statistics (ABS) estimated that more than 5% of Australians fell victim to electronic fraud in 2007
6. Verizon reported that hackers stole 285 million electronic records in 2008. Of these, by far the biggest percentage were sensitive financial information destined for sale on the black market.

The lessons for mobile banking and payments are that one cannot ignore the immense threat of criminals and innovative mechanisms to defraud individuals. It is of critical importance to this young industry to design bank grade security into the solutions being deployed at the moment. As mobile payments start growing in scale, it will attract the attention of experienced cyber criminals.