Almost half of SA consumers won’t hesitate to lie for loans, insurance claims

Some South African consumers will lie to get a loan or inflate their insurance claims and 42% of participants in a new survey think it is acceptable in certain circumstances. Others even consider it normal.

According to the Fico 2022 Consumer Survey in South Africa, many consumers who were asked about their attitude to doing things that financial institutions consider fraud, think that behaviour such as exaggerating income on applications for loans or inflating insurance claims are acceptable in some circumstances, or normal behaviour.

Nobody would really expect the average consumers to get involved in these fraudulent actions and, therefore, it is concerning that as many as 42% find nothing wrong with it in at least some circumstances.

“Many South Africans experience an increase in the cost of living and might consider that they can ease their circumstances by falsifying information in applications for credit,” says Michelle Beetar, who heads Fico’s operations in Africa.

“However, this misrepresentation is fraud. Financial institutions that can spot anomalies suggesting that information is exaggerated or misstated can take positive action to protect themselves from losses which would occur when the customer cannot afford the repayments. Customer can also be prevented from going down a path they will regret following.”

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Choosing a financial services provider

When the 1 000 participants were asked to rank their considerations in selecting a financial services provider, 36% ranked good fraud prevention as their number one concern and 43% ranked it as the second most important consideration.

For financial institutions, this shows that they can effectively communicate a focus on fraud protection that will give them a competitive advantage. Ease of access to their banking services was the most important consideration for 31% percent of respondents, while only 1% considered sound environmental and green policies as the most important and 35% put it last on the list of eight considerations.

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Customers leave when fraud protection does not work well

Customers must engage with fraud protection and security when they open a new account or use an existing account and they encounter it more often as the need increases to stop fraud as part of an industry drive to provide more security through the rollout of initiatives such as 3D Secure 2.

People say they encounter fraud checks more frequently and it is affecting their willingness to open and use some accounts, with 66% saying identity checks when they make an online purchase using their cards increased over the past year and 65% that identity checks when they log in to their bank accounts also increased.

They indicated Identity checks that were too difficult or time-consuming stopped them from opening a range of different accounts.

Identity checks can also have an impact when accounts are open and nearly one in four participants (23%) said they reduced or stopped using their personal bank accounts due to identity checks, while 25% said the same about their credit cards.

“Each customer interaction has a different risk profile influenced by behavioural signals, the ability and willingness of customers to use various authentication methods, the value of the transaction and the financial institution’s own risk appetite,” Beetar says.

This means that financial services providers must be able to be flexible and not put too many barriers in the way of legitimate customers, but equally not lower their fraud defences.

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More consumers think they were victims of identity theft

In the survey 7.2% of participants said they know criminals stole their identity and used it to open a financial account, a significant increase from 4.6% in the 2020 survey. These figures may seem low in percentage terms, but compared to the number of victims, the scale of the problem becomes more alarming, as 7.2% of the South African adult population is over 2.7 million people.

An additional 6.9% think it is likely that their identity was used to open an account fraudulently. Men (9.2%) are more likely than women (5.3%) to say their stolen identity was used to open an account and those older than 65 (22.6%) are the most likely to say so.

“With almost a quarter of South African respondents feeling that it is possible or likely that they were the victims of identity theft, financial institutions have an important role to play in establishing trust,” Beetar says.

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Biometrics takes the lead, but what about consumers’ choice?

Participants also said they strongly prefer to use a wide variety of account security methods and biometric methods are popular, with 62% having a strong preference for a fingerprint scan, 52% for a face scan and 38% for an iris scan.

Although biometrics is becoming a popular choice in all countries surveyed, South Africa is one of the leaders, with 36% of participants in 14 countries preferring a fingerprint scan compared to 62% in South Africa.

However, 40% of South Africans also had a strong preference for usernames and passwords, compared to just 23% for the rest of the world.

Local participants (38%) rated getting one-time passcodes (OTPs) by SMS as excellent for security, compared to 45% who believe receiving an OTP through their banking app provides excellent security and 16% rating getting it on WhatsApp as excellent for security.

The other countries surveyed were the USA, Canada, Brazil, Mexico, Colombia, Peru, Philippines, Malaysia, Thailand, Indonesia, Germany, the UK and Sweden.