The Cost of Fraud on Financial and Mental Health

As a credit union CEO, I spend a great deal of time considering the challenges that digital fraud presents to the financial services industry, and I’m deeply concerned about the growing threat of digital crimes not only in our industry but running rampant across all business sectors nationwide. From government agencies to transportation, energy and healthcare, it seems no industry is immune. Bad actors are targeting consumers with a variety of increasingly sophisticated scams that employ the same technology-based innovations used to streamline and simplify services. With fraudsters’ constantly evolving methods, cybercrimes are exploding exponentially – and we must collaborate, adapt our approaches, and be ever vigilant.?

Phishing emails. Smishing texts. Vishing phone calls. Typosquatting. Fraudulent websites. Social engineering. Malware. Ransomware. Distributed Denial of Service (DDoS) attacks. We’ve essentially had to create an entirely new language just to deal with the scope and prevalence of cyberattacks and digital fraud. The FBI reports 2.6 million consumer fraud complaints in 2023, with $1.8 billion in bank transfers and payments fraud alone and $10 billion in losses to consumers overall. According to the National Credit Union Association (NCUA), the financial services sector is one of the most internet-facing of our economy, thus making it a target of bad actors. The potential reach and impact of digital fraud has risen with increased adoption of digital banking – viewed as a game changer for member convenience but a target for fraudsters.????

With May being Mental Health Awareness Month, we also know the personal costs of digital fraud to credit union members can be devastating. It is also taking a toll on team members. It’s what keeps me up at night. Identity theft, stolen funds, and the time and effort to resolve fraudulent activity can severely disrupt members lives and their financial stability. And for many, the psychological and emotional toll is as significant as the financial one, requiring years to restore their peace of mind.?

At the organizational level, credit unions are working around the clock to combat these threats. From enhanced security measures to investigating fraud incidents and trying to make our members whole when they've been targeted, we are living up to our credit union philosophy of people helping people, reinforcing member trust and loyalty.?

But, given current circumstances, we all have to step up our game when it comes to cybersecurity – protecting our members is a core responsibility for credit unions. We must partner with members and team members using a multifaceted strategy to anticipate and prevent fraudsters from gaining access to our information and systems. I'm a big believer in proactive, layered defenses. Investing in advanced threat monitoring and robust authentication methods is required, but we also need to inform and educate our teams and members about the latest fraud tactics and best practices for safeguarding personal information.??

In our day-to-day activities, we’ve all adopted the modern conveniences of a post COVID world. Factors like remote work and use of AI, without a thought, make us all more vulnerable to digital fraud. And, with cybercriminals now adopting business-like approaches and relying on tools like generative AI, it’s becoming harder to identify and prevent it. As they get smarter, we must get smarter, too. At the end of the day, it’s the human element that may be our biggest vulnerability. The inclination to be friendly and helpful can make us all susceptible to social engineering in the form of a cleverly disguised email, phone call, or text message from someone posing as your boss, manager, or even a contact you haven’t heard from in a while. If you get a text from me asking you to buy fifty $100 gift cards, it’s a scam!?

Criminal masterminds are constantly dreaming up new and more devious ways to steal from people – including credit unions and their members, which means the threat of digital fraud is not going away anytime soon. In fact, it will likely only grow more sophisticated and pervasive. We need to be vigilant, adaptable, and willing to learn from new threats. Thankfully, the credit union industry is fantastic at collaboration. It’s at the core of who we are and what we do. After all, as a not-for-profit, credit unions answer to their members-owners, not shareholders or investors. To best serve you, we make it a point to share best practices, and resources – it's a real team effort industry-wide to ensure both you and your finances are protected.?