With 57 percent of all fraud victims over the age of 50, elder fraud is one of the most concerning problems in the United States. Banks and financial organizations represent a crucial point in this chain of abuse because most fraud revolves around banking and financial scams designed for uneducated, financially illiterate, and lonely elderly persons. Elder fraud costs billions each year, with costs affecting both financial institutions and seniors affected by the fraud. Taking steps to prevent elder fraud benefits your customers, your organization, and helps build trust with older consumers while improving and even saving lives.
While not every financial organization has the resources to make real change happen for their elderly customers, one can take several steps to reach out and reduce vulnerability to fraud.
Financial Education and Literacy Programs
Lack of both awareness and education are keys to elder fraud. These allow seniors to fall for scams for no other reason than that they were unaware they existed. Good financial education programs are designed to make seniors aware of common senior fraud scams, teach safer digital banking practices, and help seniors to learn more about how to recognize and act quickly when fraud happens. Seniors are often targeted by scammers because of their lack of awareness of digital security or technology.
Anti-Fraud Education – Teaching seniors about fraud and scams targeting the elderly enables one to actively create awareness of common scams and fraud. Here, one can highlight specific types of fraud such as phishing schemes, scams, and other tactics scammers use to defraud the elderly in order that individuals recognize them when they appear. Simply being able to identify and avoid scams based on warning signs can help prevent some fraud and will give the elderly more tools to protect themselves.
Online Security – General online security education is just as important as specific anti-fraud or fraud prevention. Here, one can teach individuals about safe banking practices, safe web usage, how to create strong passwords, how to protect themselves online, what to do in case of a computer virus, and so on. Many elderly Americans were born well before digital banking was even theoretically possible and therefore many struggle with online banking and safety. Creating courses around online safety can help to bridge that gap. This gives elder customers more tools to protect themselves through awareness.
How do financial education and literacy programs play out in the real world? First Financial Bankshares in Abilene, Texas received the American Bankers Association Community Commitment Award for its Financial Exploitation Education Program. It focused on educating seniors in financial fraud and scams. The program has saved customers in excess of $100 million since 2014 and led to over 50 arrests.
What can one do? Creating outreach programs in senior care homes and in public spaces as well as digital-only education portals will help one reach out and educate everyone who is interested. One’s goal here should be to drive awareness of fraud and fraud prevention rather than to market one’s products or services, but one will be driving brand awareness at the same time.
Automation to Spot and Prevent Fraud
While using financial education to teach the elderly about fraud scams, tactics and how to protect themselves on and offline can help reduce fraud, nevertheless, they are not enough. Millions of older Americans suffer from the early onset of Alzheimer’s and Dementia, are busy, distracted, going through rough periods, lonely, or even seriously ill. This puts many at an increased risk of fraud and protecting those vulnerable members who might not have the state of mind to do so themselves is important. Here, automation and algorithms to spot and detect fraud are increasingly coming into play, with many banks using simple algorithms.
For example, CitiBank uses an algorithm to spot fraudulent withdrawals based on normal use patterns by age. The algorithm works to detect patterns of withdrawals and bank usage to note changes as well as to flag and highlight suspicious activity for manual review. For example, if several large withdrawals are made from an elderly person’s account, checks were written to someone new, or a series of smaller, suspicious transactions are made over a longer period, the algorithm flags them for review. When CitiBank detects fraud, it files police reports with local authorities to ensure something is done with the information.
Wells Fargo also has a similar program, in which an algorithm is used to track the individual financial habits of each customer. The program flags sudden changes in behavior, such as new withdrawals from an ATM, large expenses, suddenly being overdrawn or incurring late fees when neither of those was a problem in the past. This type of individual pattern recognition is relatively easy with automation, especially using digital banking, where individual patterns are more easily stored and recognized. Most importantly, banks already store this data and making use of it for fraud prevention does not require collecting additional data.
Integrating a similar program in one’s own financial services largely means utilizing data with an algorithm designed to spot abnormalities in behavior.
Allocating Account Advisors
While it’s often important for elderly customers to retain some account autonomy, that often isn’t possible. Encouraging elderly customers (over 70) to adopt joint accounts with either children or caregivers, is one important step which could be used to prevent fraud. However, this isn’t always possible, and seniors must be extremely careful with whom they allow access to their account. Assigning manual monitoring to at-risk accounts is also an option for some banks, but one which typically costs too much to be viable. Creating awareness and education programs for the children and caretakers of the elderly is one way to improve this but will require additional customer and community outreach to pull off successfully.
The elderly are among the most vulnerable to financial fraud and senior fraud costs over $30 billion each year. Taking steps to protect one’s customers from elder fraud will save the bank money, reduce litigation, and greatly improve the lives of one’s customers, no matter what one’s financial service. Taking the time to evaluate customer risk with one’s financial organization and determining how one can work to prevent it will also help one build trust with customers, create longer-lasting relationships and will work to improve one’s services over time.