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Top Fraud Prevention Priority During Economic Uncertainty: Focus on Customer Experience

Hand holding a smart phone with a fingerprint ID and lockpad

As consumers react to the rollercoaster that is the US economy, it’s imperative for fraud prevention leaders to streamline identity verification and authentication processes, ensuring good customers get the high-quality user experience they deserve while keeping fraudsters at bay. High inflation rates have roiled the consumer industry — impacting food, fuel and housing prices, hitting consumer wallets hard. More than anything, as consumers look to reduce costs, you don’t want a cumbersome customer experience to be the reason they take their business elsewhere.

Consumers aren’t sure what’s happening with the economy

Inflation, while moderating a bit this past November, continues to leave many consumers feeling uncertain. While over half of Americans reported being optimistic about their finances in the next 12 months, 54% said their incomes were not keeping up with inflation. Consumer prices rose 7.1% in November from a year ago, down sharply from 7.7% in October and a recent peak of 9.1% in June.

Of the 83% of Americans who reported inflation in their top three financial concerns, 49% indicated their household finances were worse than planned, and 59% of them reported their incomes were not keeping up with inflation, according to the TransUnion Consumer Pulse Q4 2022.

Consequently, concerns about inflation and a possible recession saw consumers pull back on spending, with more belt tightening expected in the future. In Q4 2022, 58% of consumers said they cut discretionary spending and plan to cut additional spending in the next three-months­: 55% discretionary spending, 44% retail purchases and 42% large purchases. 

Expected change to household spending

Fraud prevention priorities adjust to consumer outlook

As consumers alter their behaviors in response to continuing financial headwinds, they’ll be looking for ways to balance their budgets — which means every business relationship could be scrutinized. As a result, fraud prevention leaders in consumer-facing industries should shift their priorities to customer loyalty and reducing friction when acquiring new customers.

As consumers seek to manage their financial situations, it’s imperative fraud teams are prepared to support the programs that could be taken advantage of. Each industry has a unique ability to support consumers in times of financial stress. From government unemployment programs for those who may have lost their jobs to streaming media service providers offering a better content bundle at a competitive price, consumers will be looking to bolster their household finances.

Changing consumer financial behavior opens the door to specific fraud risk


Consumer spending strategy

Fraud prevention priorities


Reduce cost of necessary purchases

Account takeover, chargebacks and promotion abuse

Hospitality and transportation

Get the best deal on family trips

Loyalty fraud

Media and entertainment

Switch streaming media providers

Customer acquisition and promotions


Seek out player bonuses

Bonus abuse

Financial services

Increase revolving credit use, especially card

Account takeover and fraudulent charges


Switch car insurance carriers

Application rate evasion

Government services

Submit unemployment insurance claim

Secure unemployment benefits enrollment and payments


Loyalty programs at risk given their value to cost-conscious consumers

Many businesses offer a loyalty program with a financial incentive to join. Whether the loyalty incentive offers discounted pricing at grocery stores, points toward an award at your favorite coffee shop, or exclusive services like free upgrades at a hotel, such programs are a popular way to acquire and retain customers. In challenging economic times, expect a potential increase in loyalty program sign-ups as people look to stretch their dollars for everyday goods, big-ticket purchases and travel.

While these programs are popular, they’re also ripe for fraud. During Thanksgiving weekend in 2022, US average daily ecommerce fraud jumped 182% over the rest of year, with promotion abuse and account takeover fraud as the top types of fraud globally. Account takeover fraud, in particular, is closely associated with loyalty program fraud. But not only was recent fraud activity especially high, it’s estimated there’s $48 trillion in unused loyalty points and $1 trillion in estimated loyalty program fraud losses annually. Protecting these programs is key for fraud leaders — not just for your business’ bottom line, but for your brand reputation and its ability to help you acquire and retain good customers.

Increased credit utilization provides fraudsters a place to hide

In response to challenging financial times, consumers are planning to increase their use of revolving credit. Consumers opening new credit cards are projected to rise by 14% in 2022, 19% for personal loans and 42% for home equity loans, according to TransUnion’s 2023 Credit Forecast. Card balances are expected to continue their growth trend in 2023, albeit more slowly, rising to $934.5 billion by the end of 2023 (an increase of 1.8% YoY). And while new account openings may cool a bit in 2023, of the 69 million Americans who said they planned on applying for new credit in the next 12 months, 53% planned on a new credit card, 22% a new personal loan and 14% a new home equity line of credit, according to the TransUnion Consumer Pulse Survey.

With increased account openings and credit utilization, we’ll likely see more fraudulent behavior:

  • An increase in first-party fraud as consumers feel the financial strain, with the potential for customers on book of accounts switching from a good customer to a bad customer.
  • An increase in account takeover, impacting any accounts that have value associated with them. While this is of high concern for banks, it’s also of concern within retail, ecommerce, quick service restaurants, hospitality and transportation.
  • A continued emphasis on scamming certain demographic groups connected to the evolving market, such as the elderly.

Prioritize a friction-right customer experience to retain and acquire good customers

Jeff Bezos, the founder of, was recently quoted in the Wall Street Journal as saying, “…the probabilities in this economy tell you to batten down the hatches.” Seems like sound advice from an iconic business leader, but does it apply to fraud prevention leaders too?

First, recognize that fraudsters love economic instability as it necessitates behavioral changes amid which they can hide. We saw that in record unemployment insurance fraud at the start of the pandemic. Second, when financial times are tough, regular people (your customers) may be pushed to behave in ways they normally wouldn’t. That’s where fraud prevention teams are most challenged — protecting customers and their businesses by recognizing a behavioral change in account access and use.

While the initial inclination may be to tighten up fraud controls, keep in mind that doesn’t have to be done at the expense of the customer experience. By prioritizing the user journey and ensuring a “friction-right” customer experience, fraudsters are identified and foiled while good customers are honored with the streamlined user journeys they desire.

Rethinking fraud strategy to focus on customer experience

What tangible steps can you take to block fraud while retaining and acquiring good customers?

  1. Employ fraud prevention solutions with authoritative identity signals: Fraud prevention focuses not just on how to stop bad actors, but also on authenticating (with appropriate friction) whether the person on the other end is who they claim to be. To provide a smooth customer experience while simultaneously reducing the risk of fraud, organizations need authoritative identity signals that enable them to accurately assess risk and extend trust in digital interactions.
  2. Utilize additional data signals to link identity to device: Linking online and offline consumer data with data inherent to the device provides additional signals to determine whether a device is in the hands of the individual who owns it. These dozens of signals and their interrelationships provide the clear intelligence needed to distinguish legitimate consumers from potentially risky parties. The more positive signals connecting a device to the person behind the device —including email address, phone number, carrier reputation, whether the phone has recently been ported, and IP-based behavioral attributes — the more confidently organizations can decrease manual reviews and unnecessary friction, reduce false positives and mitigate fraud.
  3. Analyze user behavior in the online channel: Analysis of user behavior — the way users physically interact with their devices and engage with organizations’ online properties — further distinguishes genuine consumers from the typical activity of fraud rings. For example, legitimate users enter personal information into an account application with minimal hesitation or correction, while bad actors attempting to impersonate consumers may pause to look up required information or edit answers. The discrepancy in behavior serves as a multiplier, calling greater attention to risk signals that may not otherwise command the scrutiny of a fraud prevention program.

Learn how TransUnion TruValidateTM can help you deliver a better customer experience while protecting your customers and business from fraud.

If you’re a consumer with questions or issues related to your personal credit report, drivers history report, disputes, fraud, identity theft, credit report freeze or credit monitoring services, please visit our Customer Support Center for assistance.

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