Fraud & COVID-19: Year 2 on the Horizon

 A Rising Sea Level for the Contact Center

Since the onset of COVID-19, Next Caller has been tracking the meteoric spikes in customer call volume and fraudulent activity bombarding contact centers across industries. One sector that has been hit particularly hard is financial services. From missteps in the rollout of the initial stimulus package and SBA loans to wide-ranging financial hardships felt by individuals across the country, contact centers across the financial services industry have been engaging in an exhausting game of whack-a-mole to manage the crisis. 

For the most part, the activity that we monitored throughout 2020 presented itself in the form of volatile waves. Responses and reactions to the crisis resulted in individuals taking to the phones at a frenetic pace, but their activity wasn’t always consistent or predictable. Of course, as these waves swelled and crashed into the enterprise, fraudsters were lying in wait, using the panic and anxiety as the perfect cover to carry out their nefarious deeds.  

And while those waves have calmed to some degree over the last several months, due in part to consumers and organizations adapting and acclimating to the conditions brought on by the crisis, the most recent Next Caller data shows that a lack of volatility cannot be mistaken for a calming of the waters. In fact, what we’re seeing now is more likely a potentially permanent rise in the sea level. 

Since the start of 2021, banks have seen sustained, elevated levels of both overall call volumes and high-risk calls. In fact, between December 2020 and March 2021, overall call volumes have remained at least 10% above normal and trended as high as 66% above normal during some periods. In a given week, volume increased as high as 143% for a banking client. When compared to the previous waves of call volume that ebbed and flowed in the early months of the pandemic on a weekly, if not monthly basis, it becomes clear that the operational pressure put on contact centers from more customers calling may not be as volatile, but we are still way above the old normal. 

Tracking high-risk calls have revealed a similar pattern. While there seems to be less volatility, high-risk calls are routinely 10-25% above normal ranges for all clients and 20-45% higher for banking clients. While the correlation between call volume and high-risk calls seems to have improved, for the time being, we should not conflate that notion with there being less risk posed to businesses. In the early days of the pandemic, we saw high-risk calls spike to levels as high as 300% in a given week as criminals took to the phone to steal PII using social engineering. Today, we have seen weekly spikes even higher (up to 310%) even if the overall weekly changes show less fluctuation. 

This does not bode well for what fraudsters have in store. In the early days of COVID, there were wide reports of Americans having lost upwards of $150 million to COVID-related fraud. That number continued to grow by the day, while the PPP loan program simply added more opportunity for fraud to the equation. Now that another round of stimulus checks is being delivered, criminals are sure to ramp up their efforts to take advantage of consumers and businesses. Armed with accurate PII and brimming with confidence from their success in “Round 1,” we can expect more fraud to come, and in many different forms.  

In The Line of Fire – Direct to Consumer Fraud 

Over the past year, we’ve been tracking the surges in fraudulent activity affecting individuals across the country. At the end of March 2020, a worrying 32% of Americans reported that they believe they’ve been targeted by fraud or scams related to COVID-19. In September a whopping 55% said the same. Today the number of Americans who said they’ve been targeted by the surge in criminal activity that COVID has ushered in remains similar at 51%. 

What’s different, however, is how those scams and schemes are evolving alongside the pandemic. 

50% of those who said that they have been targeted by fraud indicate that it has been in the form of attacks related to the stimulus package — a worrying signal with the rollout of the third stimulus underway. Perhaps even more disheartening is the fact that 31% of those who said they’ve been hit with COVID-19 related fraud said that it’s been in the form of scams and schemes related to the COVID-19 vaccine, confirming that criminals have no boundaries when it comes to exploiting individuals. 

And while the nefarious activities outlined above are easy to correlate with the crisis, it appears that COVID-19’s impact on criminal activity is even more insidious than many understand. When asked whether or not they have been a victim of identity theft in the past year, 21% said yes. If true, the implications are staggering given that the Center for Victim Research suggests 7-10% of the U.S. population are victims of identity fraud each year. 

Have we doubled, or even tripled the number of victims in just one year? In 2019 studies found that 14.4 million — or 1 in 15 individuals — became victims of identity fraud. Whether victims are able to attribute it to COVID-19 or not, it’s almost certain that the shocking amount of PII that’s been pilfered using scams and schemes related to the crisis is contributing to the alarming increase in identity theft taking place.

While this is daunting, there is good news to report. It seems that individuals have come to realize that the fraud threat they face today is very real and are taking more precautions to protect themselves. The number of Americans that said they have not taken any additional precautions to protect themselves from these attacks has dropped significantly from 59% to 42%. Further, 51% of Americans said they check their online accounts for fraudulent activity each week, with only 6% said they never monitor their accounts. These, at least, are promising trends in an ocean of uncertainty. 

Following the Fallout 

As we’ve seen throughout this pandemic, call volumes and fraudulent activity are tied to specific events — usually economic in nature — such as stimulus checks and loan disbursement from the government. While hope abounds as several vaccines are making their way towards mass availability, the truth is that the fallout of the crisis will continue to unfold for years to come. By identifying the events that are triggering and sustaining call volumes and fraud activity today, we can start to piece together a more predictable roadmap to prepare for the events that lie ahead.

In December, American’s received the second round of stimulus checks from the government. And while the rollout of this subsequent aid was far less sloppy than the first, many Americans still reported that they did not receive the checks they believed they were supposed to. Similarly, a substantial chunk of Americans who used tax preparation services reported that they had their stimulus payment sent not to their bank accounts, but to bank accounts with numbers they did not recognize. While the IRS has said that these unfamiliar account numbers were temporary bank accounts used by tax preparation companies to route refund loans or other banking products to customers and that individuals would still receive them, there’s no doubt that many have taken to the phones to inquire about the missing checks. Our research confirms this with nearly a quarter (24%) of Americans who said they’ve already or plan to call their bank or any other organization to inquire about the next stimulus check and nearly one third (30%) said that they will call “if they don’t receive their stimulus check on time.”

Part in parcel with the economic impact of the crisis is loan defaults, particularly those related to housing. The recent Mortgage Monitor from Black Knight paints a troubling picture, claiming that the national delinquency rate could remain elevated for another 17 months and it would take nearly five more years for serious delinquencies to return to pre-pandemic levels. Furthermore, by the end of March, there could be nearly 1.5-1.6 million excess, seriously delinquent mortgages left in the market.  An overwhelming 78% of Americans said that they are worried that the fallout from COVID-19 will have an impact on their finances in the future, with 30% having said they are “very” worried. So, while there’s no doubt that banks are seeing a steady stream of activity from consumers around these delinquencies today, that stream could turn into a deluge in the coming months. 

Staying Prepared

There will be many trends playing out in the near future that will create new urgency for consumers (and new opportunities for fraudsters). Some, such as the economic fallout mentioned above, or the new round of stimulus checks that recently made their way through Congress, can be anticipated. But other events will be impossible to predict. With an understanding of the root cause of the activity taking place today, organizations can be better prepared for tomorrow. That root cause tends to be consumer confusion and anxiety. When money is involved, so is the call center. 

As we talked about in the past, this remains a battle waged on two fronts: security and CX. Financial institutions must continue to find ways to keep their customers safe, without comprising the experience they provide in order to satisfy consumer expectations. Additionally, research from Deloitte Digital found that slow, unavailable or unhelpful call center services due to high call volume can result in 25% of customers switching banks–making the situation much more detrimental for financial institutions looking to pave the path towards recovery. 

While society is adapting to a new way of life during the pandemic, it’s clear that financial institutions are also facing their own new normal.  If we take the old adage as a word to the wise: the rising tide will indeed lift all ships, so it’s time for us to prepare the harbor for a flood of new activity.