In today’s society, millions of people invest their money in various financial markets to try to earn high returns or make profits to take certain risks in order to use them in retirement. Whether you are investing for short term profits or planning for retirement, the risk is certainly what you will incur when you invest your hard earned money. Investors should certainly make informed decisions about investment opportunities and have a close look at all potential investments. Unfortunately, as we’ve seen recently, some companies or individuals try to seize the opportunity to steal hard-earned money of others.
The effects of online fraud in the financial market are undeniable. This law introduces direct financial loss. Online fraud and digital identity theft are causing millions of dollars in losses for the financial sector each year, not to mention e-commerce or telecommunications.
Financial fraud has been around for a long time and still torments our world with the various forms used by the various organization.
Financial fraud has become an inescapable phenomenon, forcing the government and other regulators to enact or enforce more stringent regulations to deter possible financial scandals.
Listed below are the impact online fraud has caused to the financial market
Loss of good reputation
Security issues directly impact the company’s reputation, which must compete with the established reputation of traditional banks. The loss of reputation has a direct impact on the acquisition of new customers as well as on relationships with partners and investors.
Loss of customer confidence
Security is essential to the clients of a financial institution. Online fraud is perceived as an attack on the security of personal and financial information and leads to the loss of customers looking for facilities that offer them more guarantees. Even if the customer is not completely lost, cross-selling with these accounts can be impacted, which minimizes business with the institution.
However, the problem does not stop there: Even if fraud is due to online payments to third parties, studies indicate that a high percentage of customers consider the financial institution responsible.
Security audits are required for all companies that store data classified according to the LDPD (Personal Data Protection Act) with the medium or high-security level. Financial institutions are expected to require a high level of security. Therefore, an audit should be conducted every two years.
However, the absence of an audit does not result in any sanction per se, loss, alteration, unauthorized access or processing of personal data.
Loss of income
All the above measures directly or indirectly result in loss of income that in any way affects the profit or loss of the institution. For large financial institutions, this loss can be more or less offset.
In summary, online fraud has far-reaching effects on the financial sector far beyond the immediate loss of income, apart from the impact online fraud has on of loss of income, it has also caused loss of reputation and trust on financial sectors which manifests itself in the short, medium and long term.