Why Online Banking Scams are So Common

What is online banking fraud?

Online banking fraud is the intentional illegal act to obtain money or assets from victims through the coercion of personal information through various different methods.

Online banking scams didn’t really take off until circa 2004, even though internet banking has been around since 1981. Internet banking became widely used in the late nineties and early noughties. This increase in online banking use naturally gives way to many opportunities for internet banking scammers.

For instance, Statista reports since 2007, internet banking use has grown from 30% in Great Britain to 76% in 2020. It’s becoming more difficult for individuals to protect themselves appropriately as scammers become more skilled at crafting campaigns.

How does online banking fraud happen?

The popularity of online banking is generally due to its convenience for both user and the bank as it is more efficient for both parties. Online banking also cuts out the need to personally visit the bank to make transfers or payments.

Benefits aside, internet banking comes the inherent risk of types of internet banking scams. As users weren’t initially aware of the risks of online banking and weren’t protecting themselves accordingly, scammers have taken advantage of the opportunities to target unsuspecting victims. This is why many people have fallen victim to online banking fraud over the years, leading to a steady incline of online banking scams.

Internet banking is now used by 7 out of 10 people, according to the Financial Times, correlating a surge in mobile banking to the doubling of online bankers in the last decade. This trend answers for the increased opportunities for internet banking scams, which is why online banking scams are so common today. Common types of internet banking fraud are no longer limited to computers but also include types of mobile banking frauds too, with 53% of the British population using their bank’s dedicated mobile app once a month at least.

Types of banking fraud

So, how do online banking scams differ from other forms of bank fraud? We broke down the four key types of bank fraud in a recent blog post, but these aren’t all unique to online banking. Most types of online banking scams follow a similar process where the scammer finds a victim’s account details and uses this to transfer money from the victim’s account into their own or to make their own payments. But how do fraudsters get hold of this information to begin with? There are three common ways in which this is done:

1. Malware attacks

A malware attack is when a scammer targets computers with malicious software which usually comes in the form of links or attachments from unknown email senders. A malware attack is one of the types of banking fraud to keep in mind when on your laptop or smart device as, according to Verizon, 94% of malware is delivered by email. If the recipient then clicks on the link or opens the attachment, the victim will unknowingly permit harmful software to install on their computer which then records any personal information entered into banking sites.

2. Phishing

Phishing is one of the most common online banking fraud methods. Fraudsters send email scams impersonating the victim’s bank to coax the victim to hand over their personal data for verification purposes when logging into their online bank. Phishing scams have risen to their highest level since 2016 in Q1 of 2020, the APWG reports. According to Propeller, an increasingly popular method of phishing is by targeting Dropbox, which gets a 13.6% click rate from victims.

3. ‘Over the shoulder looking.’

In this situation, the fraudster watches victims in everyday situations when making financial transactions; such as inputting their pin at a cash machine, giving card details over the phone, or purchasing an item online in a public place. Using the details entered, the scammer makes a record of them and uses them fraudulently. This is also one of the types of mobile banking frauds, as people often use mobile banking while out and about.

Ways to prevent online banking fraud?

These scammers are talented in making sure that the email looks legitimate from your bank, with a staggering 97% of people unable to identify a sophisticated phishing email. Your bank will never ask you to share personal log in or banking details via email. If you receive an email from your bank or an unknown email address impersonating your bank asking you to update or share your bank details with a link included in it, then it’s best practise to ignore this completely. By being aware of these malicious scams and knowing not to click on any links you reduce the risk of online banking fraud through a malware attack or phishing scam.

Make sure to block the sender and move the email to your spam or junk folder. If you are in any doubt about if your bank has tried to contact you directly, then for peace of mind, give your local branch a call. Alternatively, if you do need to update any bank details, make sure to do this through your bank’s legitimate website.

It’s always worth being mindful of the three types of banking fraud mentioned in this article. If you have been targeted by online banking fraud and scams, it’s worth familiarising yourself with the types of mobile banking frauds and online banking scams, as well as how the bank fraud investigation process works. If you believe you are being investigated due to allegations of internet banking scams, please get in touch with our experienced fraud barristers. They are highly skilled in defending and prosecuting in banking and insurance fraud.