What is the cost of fraud? It’s more than you may think.
Financial fraud costs the global economy US $3.7tn each year. But the impact of fraud spans far beyond financial loss. It damages your reputation. It deflates team morale. And it can also have serious repercussions on the well-being of its victims.
Here, we look beyond the direct financial impact of fraud, to understand its true effect on your platform and community.
How fraud impacts your platform’s reputation
People don’t want to use platforms that can’t keep their personal data safe. If fraud is mismanaged, word gets around. And the damage ripples into high customer dissatisfaction, bad publicity, loss of market share and user drop-off.
To put a number on it, the reputational damage from fraud can cost up to 100 times more than the direct financial loss.
How fraud impacts victims’ finances
It’s reported that in 2022, Americans lost $8.8 billion to fraud. But the true number could be significantly higher, as only 32% of victims file a report.
These statistics are shocking, but they almost desensitize the issue. So let’s think about the individuals. On average, 21% of people lose US$1,200 or more to scams. That could be someone's rent, or the money they need to feed their family.
In some cases, people lose their entire life savings. Like this couple who lost $10,000 to a scammer on Facebook Marketplace. Or the UK woman who lost £120,000 to an online romance scam.
With their money stolen, victims can fall into arrears with their bills, which subsequently damages their credit history. This can limit their access to future credit, or even result in their home being repossessed.
How fraud impacts well-being
Fraud can be an incredibly stressful and traumatic experience, causing significant damage to a person’s mental well-being. Many victims blame themselves, and bear feelings of guilt, shame and even self-hatred.
But it’s not just the victims who carry the weight of fraud. Fraud can also take its toll on your team. Without a fraud prevention strategy, roles across customer service, IT and finance become increasingly more challenging. And the risk of burnout multiplies.
How fraud impacts your platform’s regulatory compliance
Across the world, governing bodies are putting more pressure on platforms to tackle fraud. In many ways, they’re held more accountable than ever.
Your business may be fined for failing to comply with customer data and anti-fraud regulations. You may also have to deal with legal battles to recover losses for victims, or defend against accusations of negligence. This can cause further reputational damage.
→ Learn more about counterfeit goods regulations in the EU and how Pasabi offers counterfeit goods detection.
How fraud impacts consumer safety
Without the proper systems in place to prevent fraud, your platform could be the first domino to topple numerous security breaches.
If a scammer gains access to your user’s account, they don’t just capture their password, they also gain access to that person’s sensitive information. Information like their address, their date of birth, their connections, their phone number or their bank details.
This puts all of their other accounts at risk, and that person will then have to dedicate time and effort to securing every other account they own—adding more strain to what is already a very stressful situation.
How do you prevent fraud on your platform?
Fraud prevention requires a dynamic, proactive and collaborative approach. As a team you need to:
- Recognise the scams that happen on your platform
- Continuously monitor user behavior
- Spot threats before they emerge
Pasabi’s Trust & Safety Platform does all this for you. Leveraging artificial intelligence and pattern detection, it protects your users against fake reviews, fake accounts, counterfeit and scams. With it, you also get a team of fraud prevention experts who can help you understand the latest regulatory changes and current fraud trends.
→ Find out more about Pasabi’s Trust & Safety Platform
Whether it’s fake reviews on online marketplaces, or phishing scams in the sharing economy, one thing all fraudulent activity has in common is that the criminals behind it all have no empathy for your platform or your users. They know the consequences of their actions, and yet, they continue to deceive consumers and in some cases, ruin people’s lives, to fuel their own greed.
The purpose of this information is not to instigate fear, it’s to inform. Because truly understanding the total impact of fraud will help you, as a platform, to make strategic decisions about your trust and safety approach.