Rising check fraud linked to TikTok prompts urgent call for bank communication strategies

Last year, a significant rise in check fraud, particularly linked to TikTok, has come under scrutiny as more insights into related trends emerge via a recent report by Javelin Strategy & Research. This analysis highlights a specific case involving Chase Bank, where a system glitch allegedly facilitated the deposit of fraudulent checks, allowing individuals to withdraw funds quickly before their validity could be verified.

The report, titled “2025 Fraud Management Trends,” places the TikTok scheme within a broader context of friendly fraud, prompting discussions on effective strategies banks can implement to combat these emerging threats. Friendly fraud, which is also referred to as first-party fraud, occurs when consumers challenge legitimate transactions and frequently result in refunds. Common scenarios include consumers falsely claiming they did not authorise a purchase or disputing a received item as defective when the reason may stem from a simple change of heart.

Suzanne Sando, a Senior Analyst at Javelin Strategy & Research and the report’s author, emphasises that many who engage in friendly fraud do so without fully understanding their actions constitute a criminal act. “There needs to be an explanation from financial institutions and from merchants about what constitutes friendly fraud,” Sando stated. “You need to be explicitly clear about what kinds of fraud threats are out there.” Younger generations exhibit less brand loyalty and are more indifferent to the criminal implications of such actions.

Effective communication strategies are essential for financial institutions as they seek to educate consumers about friendly fraud. According to Sando, consumer feedback shows that many feel sensitive about being treated with suspicion when addressing fraud concerns. “The number one thing that we hear from consumers when we’re doing our survey data is that victims are sensitive about whether they were made to feel like they were the criminal,” she said.

To engage consumers more effectively, institutions must tailor their messaging. Younger consumers may prefer modern communication methods, such as text alerts about prevalent fraud types, whereas older demographics might favour in-person discussions or more detailed online content. “You can’t just give somebody a four-page paper to say, ‘Here’s friendly fraud, don’t do it,’” Sando advised. Instead, a proactive approach involving seamless integration of brief alerts during transactions could bolster consumer awareness.

The report further discusses the impact of artificial intelligence (AI) technologies on managing fraud. Financial institutions are gathering extensive data on customers, which can play a critical role in preventing friendly fraud. By employing advanced analytics, including behavioural biometrics and device information, banks can significantly enhance their ability to confirm the identity of consumers and assess the legitimacy of disputed transactions.

However, the integration of AI in fraud management raises privacy concerns among consumers. Sando highlighted this apprehension during her research, admitting a lack of transparency about what data is collected. “As I was doing this report, I was researching some of the companies out there that do behavioral biometrics and have information-sharing consortiums. I was looking at lists of data points they collect and use,” she said, expressing that consumers would likely feel more comfortable with data collection if they were adequately informed about the practices in place.

With rising concerns about impersonation scams exacerbated by advancements in AI, industry experts are urging robust measures to combat these issues as they evolve. Real-time payments present unique challenges, as these transactions can quickly escalate into situations where a consumer may dispute an authorised payment as fraudulent. “We have to be using this information to try and stop these scams, because otherwise they will keep growing out of control,” Sando said, reinforcing the necessity of AI’s engagement in identifying and curtailing fraudulent behaviour effectively.

As the landscape of digital transactions evolves, the interface between consumers, financial institutions, and the challenges posed by fraud continues to demand attention, informed communication, and innovative technological solutions.

Source: Noah Wire Services