What is Consumer Fraud?

The terminology of financial crime is becoming increasingly complex. The sheer scale and variety of financial crime in today’s global economy have led to a dictionary’s worth of new terms: vishing, smishing, identity fraud, social engineering, money laundering, and business email compromise – a word soup of confusing terms. 

Simply put, consumer fraud is defined as “when a consumer/customer suffers from a financial or personal loss. The fraud can involve the use of deceptive, unfair, misleading, or false business practices.” 

However, as is discussed later in this article, consumers are not the only victims: businesses can also suffer significant losses that extend far beyond immediate financial losses. 

South Africa’s Record-Breaking Rate of Consumer Fraud 

A recently published report by the software and analytics company SAS has revealed the trends of consumer fraud around the world for 2023. 

The survey spanned 16 countries and interviewed 13,500 respondents. The findings were shocking. 

“Almost half (47%) of the consumers surveyed say they experienced more fraud in 2022, even as the pandemic subsided in many parts of the world. However, the figures are notably higher in some countries than others. South Africa topped the list at 65%”

These trends are echo other findings which show that South Africa is becoming a haven for criminals to commit fraud, robbing the economy of millions of dollars. 

Why Your Brand Should Care about Consumer Fraud: The Peril of Broken Consumer Trust 

A critical finding of the SAS report was that consumers are increasingly holding businesses to account over financial crime and fraud – consumers are now willing to abandon a company if they experience fraud. 

“Globally, 89% of consumers surveyed believe that the organizations they engage with should be doing more to protect people from fraud; the numbers are even higher in Brazil (98%) and South Africa (96%).”

Consumers are not only calling for businesses to proactively combat economic crime, but are increasingly willing to punish a business for failing to do so. 

“There’s also a significant commercial incentive for businesses to invest in fraud detection and prevention initiatives. Globally, 67% of those consumers surveyed said they would switch to another provider if they experienced fraud or felt that another company offered better protection. This proportion was much higher in some countries, such as South Africa (88%).”

This means that instead of simply cleaning up after consumer fraud has taken place, it is now becoming imperative for businesses to invest in combatting consumer fraud and stopping it from happening in the first place. 

The failure to do so can seriously harm the business. 

The observation by SAS echoes calls from PwC, which has also noted how consumers are increasingly holding companies responsible for data breaches and economic crime. 

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Therefore, despite being outside of a company’s direct locus of control, consumer fraud nevertheless poses a threat to a company’s brand. Actively combatting fraud is now non-negotiable.

What Can Businesses Do? The Value of Identity Verification and Due Diligence 

These risks mean that your business should work to encourage safe behaviour among its consumers, as well as train employees to be keenly aware of the threat posed by fraudsters using social engineering techniques. 

To read a comprehensive analysis of the threat posed to your brand by consumer mistrust, read our article here. 

However, businesses can also tighten their security by more carefully verifying their business-to-business relationships – a point of significant vulnerability and one that has historically led to some major incidences of financial crime. 

To better secure business-to-business relationships, companies can invest in due diligence tools such as director lookups, AVS checks, PEP checks, and company credit checks. Risk management tools such as these empower a company with valuable information that can then be used to inform security-conscious decision-making. 

Identity Verification, Data Validation and Due Diligence Services for South Africa 

As South Africa’s leading provider of world-class due diligence and digital onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services and understand how we can help your business secure its transactions, easily schedule a demonstration by contacting our team here.