The prevalence of fraud and scams has become one of the most urgent consumer protection challenges of our time. This is especially the case for those on the margins of formal financial systems. I attended the Global Fraud Summit in Vienna this week, organized by the International Criminal Police Organization (INTERPOL) and the United Nations Office on Drugs and Crime (UNODC). It was the first global convening of its kind which brought together 1,300 participants, representing a unique and impressive mix of dedicated policymakers, technology platforms, corporations, academia, civil society, multilateral organizations, and even victims of fraud and scams who bravely offered their testimony and perspectives.
After attending, I wanted to take some time to reflect on what I learned and where we might have gaps moving forward. Firstly, the scale and urgency of the problem is clear. According to the Global Anti-Scam Alliance (GASA), one in two adults around the world has experienced a scam. Total losses due to fraud and scams are estimated at USD 442 billion, and GASA has also conducted a number of country-level studies, many of which indicate that as many as 70 percent of citizens across various geographies have lost financial resources due to a scam.
Initiatives to Stop Fraud Require Cross-Sectoral Approaches
The Summit showcased many excellent initiatives already underway and cross-collaborations among online platforms, financial service providers, and law enforcement to tackle this challenge. The initiatives are too numerous to list in their entirety or to summarize their efforts fully, but I was particularly impressed by techUK, U.K.’s cross-sectoral initiative, and Fin’s Fraud Prevention Seal in Brazil, a certification process for financial service providers.
The Summit also demonstrated the level of concerted effort required in exemplar markets, such as the U.K., to establish processes that address fraud, integrate the private sector, and empower victims. Because fraud often originates online and has wide geographic reach (often spanning several countries), addressing it often requires international law enforcement coordination. Law enforcement officials spoke about the complex coordination required and the imperative for collaboration with the financial services and technology sectors. It was, therefore, particularly encouraging to see active participation from technology giants such as Amazon, Google, and Meta, who took leading roles in many of the discussions. From researchers working in this space, we heard that contrary to previously held notions, scammers tend to target the general population rather than a specific segment, such as the elderly.
Financial Inclusion Clients in Light of This Threat
Coming from the world of financial inclusion, the Center for Financial Inclusion (CFI) brings to this issue a lens that centers individuals in developing markets who have only recently gained access to formal financial systems or remain excluded. In this ecosystem, we continue to grapple with legacy consumer protection challenges and weak recourse mechanisms for consumers who experience harm. Issues such as overindebtedness and personal bankruptcy remain inadequately addressed in many markets. Digital transformation in access to finance continues to bring financial consumers online, thus leaving them more exposed to online fraud and scams. Meanwhile, scams originate from criminal activity and place an added burden on regulators who must now address a new set of consumer protection challenges. This requires strengthening existing consumer protection gaps and addressing new ones.
To better understand the problem from a client perspective, we have seen early research by CGAP and Innovations for Poverty Action (IPA) on scam-related losses experienced by consumers. CGAP’s research conducted in Côte d’Ivoire shows that consumers of digital wallets are also targeted by scammers, although scam losses appear to be decreasing.
Comparing figures across this research, we note a variance in the volume of financial inclusion clients reporting scam losses compared to broader statistics from GASA. This is likely due to underreporting, as victims often do not report due to stigma or a lack of awareness regarding available recourse. Underreporting, however, can leave all consumers — and perhaps most precariously those recently financially included — with weakened trust in the financial system and at risk of re-exclusion. This points to where we need to do more segmented research, most urgently.
Building Victim-Centric Approaches For Financial Inclusion Clients
To build stronger preventative mechanisms, we need a stronger handle on the typology of problems experienced by victims of fraud and scams. This is particularly true for financial inclusion clients, where financial losses pose a higher threat to an individual’s overall financial health. At CFI, we are concerned that treating all consumers as a single group — without segmentation — may prevent a nuanced understanding that addresses the vulnerabilities experienced by financial inclusion clients. Consequently, there is a risk that solutions developed might not be adjusted for the particular needs of this segment.
An important dynamic to consider is that scam victims can also become forced perpetrators of crime as a result of human trafficking into scam compounds. This is a deadly and dangerous practice. At the Summit, we heard from several individuals with direct lived experiences of this devastating practice. Counseling and victim-centric support are key. This is necessary for scam victims, and for those who, despite averting a scam attempt, may still face a steep emotional toll.
To build a fully victim-centric ecosystem for financial inclusion clients, we need to work together across sectors to tackle the multiple facets of this issue, including equipping citizens on the preventive end and establishing counseling resources for those navigating a potential scam and those who experienced harm. This will require sustained effort to strengthen consumer protection, and it will require many of us to contribute.
For CFI’s part, consumer protection has been a priority since our founding. Tackling fraud and scams has now become more urgent than ever, and we are honored to have recently joined GASA as a foundation member to contribute research, findings, and financial inclusion expertise as well as to learn from others and complement industry initiatives. We are also leveraging our engagement strategy, building coalitions, and convening the sector through Financial Inclusion Week and the Responsible Finance Forum, where we will elevate this issue.
While scams and fraud pose a significant resource ask, the issue also comes at a time when we have more advanced technological resources available than ever before. Early piloted solutions show promising results, for example in the use of integrated voice recognition (IVR) to interact with clients who are skeptical of an offer they have received and seek guidance. We hope to leverage advanced tech to help us address these needs while working together to support consumers’ financial health. What is clear is that the way forward requires us to join forces with all actors in the ecosystem and work together to develop solutions that lead to effective outcomes for all.
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