Fraud is everybody’s business. As a consumer, there is a one in ten chance that you were the victim of fraud in the last 12 months, from buying goods via an online auction that never arrived (or never existed) to having your bank account emptied by swindlers. As a company, you may not even realise that some of the invoices you pay are fictitious or that one of your own employees is assisting a fraudster.
There are a number of reasons why criminals find it relatively easy to get their hands in our pockets. One is human nature - we find it hard to believe the worst about people. When you get a call from your ISP saying they have detected an infection in your laptop and want to fix it, why doubt it? But that is the starting point for a fraud many Talk Talk customers are suffering following the data breach last year and it ends up with the thieves taking as much money as they can get.
Similar naïvety can be found in boardrooms where the notion that business partners and employees are not all honest is hard to accept. When frauds had to happen in the physical world, there was a limit to the level of exposure. But as business has moved online, there are fewer personal relationships and more opportunities to exploit technical (and human) weaknesses. This culture of blind faith has to change or how else to end the 8% of all payroll being paid to false employees or the 350 fraudulent insurance claims submitted every day?
But there is an asymmetry in this war against fraud which acts as a barrier. One of the reasons why many businesses do not conduct routine checks on their suppliers, staff and customers is the cost of the data. Fraud prevention is a valuable business for data owners - arguably so, given the scale of the risk and losses involved. Assembling, managing, distributing and advising on the use of this data is expensive, so its users are expected to pay.
Yet at the same time, the level of innovation and disruption in this market is limited. New providers are focused on how to make big data as valuable to them, via behavioural biometrics, as conventional financial and demographic data have been up to now.
There is little sign of any move towards an open data model or even to allow consumers better access to information about who they are dealing with. How would you check that a phone number calling you belongs to the company claiming it? Where would you go to search the bona fides of an individual you are trading with - or even that the directors of a business are legitimate and not criminals?
As individuals, we do not have these tools and none of the major data owners are interested in giving them to us, despite their movement towards opening up credit data. It leaves criminals with a significant advantage since they hold the data - often stolen or hacked - whereas their marks are left to use their wits, discretion and judgement. And guess who gets squeezed most often?
Related articles: News Analysis: 3 steps towards better fraud prevention