Cybersecurity firm BioCatch reports a ten-fold increase in digital scams among banks, according to the company.

• This year, there has been a tenfold increase in digital scams reported by U.S. and Canadian banks, as criminals are increasingly using methods that trick customers into sending them money, says cybersecurity firm BioCatch.
• As banks have implemented stricter controls to prevent fraud, the number of reported scams has increased, according to BioCatch Director of Global Fraud Intelligence Tom Peacock.
• CNBC received exclusive information from BioCatch, a Tel Aviv-based company that utilizes behavioral data from mobile apps and websites to differentiate between legitimate users and criminals, prior to the release of a report that aggregated data from 170 U.S. and Canadian financial institutions.

This year, there has been a tenfold increase in digital scams reported by U.S. and Canadian banks, as criminals are increasingly using methods that trick customers into sending them money, says cybersecurity firm BioCatch.

Banks have implemented stricter controls to prevent fraud, yet there has been a significant increase in reported scams during the first three quarters of 2023, as per BioCatch Director of Global Fraud Intelligence Tom Peacock.

"Peacock stated that fraudsters have recognized that humans are the most vulnerable target for manipulation, making it easier to deceive them than to bypass technological safeguards."

BioCatch, a Tel Aviv-based company that utilizes behavioral data from mobile apps and websites to aid banks in distinguishing between legitimate users and criminals, disclosed its findings to CNBC prior to the release of a report that compiled data from 170 U.S. and Canadian financial institutions. The company stated that Barclays and are among its clients.

Banks are facing pressure to remove criminals from their platforms and compensate victims more as regulators and lawmakers focus on the harm caused by digital scams. The Consumer Financial Protection Bureau may penalize banks for their roles in the Zelle payments network, which saw $166 million in fraudulent transactions in 2023.

The number of "social engineering scams" has increased significantly in the past 18 months, according to Peacock.

Peacock stated that criminals prefer Zelle for extracting funds because it is quicker than other remittance alternatives.

"The rise of social engineering scams in the U.S. coincided with the popularity of Zelle, as the platform facilitated fraudsters' success."

In 2023, Zelle owner Early Warning Services reported a decrease in scams and fraud by almost 50%, despite an increase in transaction volumes. Additionally, only a small percentage of payment volumes were disputed as fraud.

BioCatch's increase in cited scams is due to increased identification of previously unflagged activity due to mounting regulatory pressure, according to Peacock. BioCatch did not provide a specific number of reported scams, citing client confidentiality.

BioCatch clients reported a 59% decrease in fraudulent account openings. However, criminals have shifted their focus to taking over existing bank accounts, resulting in a three-fold increase in fraud through that channel, the firm stated.