Internet Matters finance expert, Ademolawa Ibrahim Ajibade, explores the impacts of financial scams on young people and offers advice to keep them safe.
In the words of the famous nineteenth-century German politician Otto von Bismarck:
“With a gentleman, I am always a gentleman and a half, and with a fraud, I try to be a fraud and a half.”
Fraud is as old as money itself. But with the digital age of online banking, Decentralized Finance (DeFi), Cryptocurrencies, e-Commerce and the Internet of Things (IoT), 21st century fraud has evolved too.
Unfortunately, many assume that our kids are safe. We believe that harm will never happen to them because they’re “smart kids” or that our banking online security credentials and internet parental controls will be enough to protect them.
In reality, various global law enforcement agencies have been sounding the alarm over the past decade with statistics showing young people as prime targets for online scams.
Their heavy reliance on the internet and relative naivety means that it is easier for teenagers to lose money and private information to fraudsters online. As such, it is imperative to understand how fraud has evolved alongside social media and our internet-based finance systems. This knowledge will help us protect young people from falling victim.
Social media use has increased by 84% among teens since 2015. Furthermore, as many as 94% of young people between the ages of 18-years-old have access to a smartphone. It’s no surprise that a 2021 study* by Social Catfish — an online identity verification service — found that cyber fraud among young people spiked a good 156% since 2017.
These online financial scams can have a number of negative impacts on young people.
Young people may be more likely to fall for financial scams. These could include fake investment opportunities or phishing schemes, which can result in them losing money.
It may be difficult for young people to recover lost funds from financial scams. If the scammers live in another country or use anonymous methods to receive payment, this is especially true.
Young people who have been scammed may lose trust in financial institutions. Therefore, they may feel hesitant to engage in legitimate financial transactions in the future. This can make them miss out on legitimate opportunities that the world of digital finance offers.
Scammers may also use young people’s personal information to open fraudulent accounts. This activity can negatively impact their credit score and make it harder for them to obtain loans or credit in the future.
Online financial scams can also impact mental health. Victims of scams may experience feelings of embarrassment, shame and guilt. In extreme situations and without care, this could lead to depression and thoughts of self-harm. Furthermore, young people may experience other negative long-term impacts on their mental and emotional wellbeing.
In the USA, the volume of online scam complaints involving victims under the age 21 to the FBI reached about 23,200 last year. This amounted to over $70 million USD worth of financial losses.
Therefore, it’s important for parents and carers to be aware of the potential risks of online financial scams so they can take the following proactive steps to protect their children.
Parents should explore insurance products to protect their kids from fraud-induced financial losses.
Companies like Oliver Wyman in America provide an array of insurance solutions in the traditional finance sector. In the cryptocurrencies and NFT world, which is dominated by young people, innovative DeFi protocols such as InsurAce.io provide specialised insurance products to indemnify crypto users if they fall victim to online fraud that leads to theft of their valuable digital assets.
Parents can explore these products to claim compensation when their kids are unable to retrieve funds lost to online scam artists.
Parents and carers should talk to their children about basic online etiquette such as being sceptical of unsolicited messages or phone calls, not giving away personal information and being cautious about clicking on links.
Additionally, young people must be educated on how to identify and avoid financial scams.
When kids report an incidence of online fraud, parents should endeavor to speak with an expert instantly to help mitigate the effects:
Explore step-by-step guides for games, apps, platforms, broadband and more to help keep your child safe from financial scams and other harms.
Financial institutions and social media platforms that have minors among their user base have crucial roles to play in protecting young people from the negative impacts of online scams.
Financial institutions can educate young people, parents and educators on the risks of social media scams, including how to identify and avoid them. This can be done through information sessions, workshops and online resources.
Financial institutions and social media platforms can implement advanced fraud detection triggers. These can proactively identify and block suspicious transactions. For example, this can include:
Financial institutions can implement two-factor authentication that would require authorisation codes sent to parents’ devices for online transactions and critical data exchange involving kids to reduce the risk of fraud and phishing.
Institutions can encourage young people to report suspicious activity or scams. They should have a kid-friendly process in place to quickly respond to and resolve reported incidents. Kids’ accounts should be prioritised for attention and quick resolution.
Support staff should be trained to communicate effectively with minors and promptly alert parents or law enforcement where necessary. Financial institutions can collaborate with other organisations, such as law enforcement, to share information and intelligence about social media scams. This could further improve their ability to detect fraud, prevent recurrence and mitigate the long-term impacts on kids.
Financial institutions can monitor social media platforms for suspicious activity, such as phishing attempts through parody social media accounts and fake websites, taking prompt action to shut them down.
Remember that users can forward phishing emails to [email protected] while texts can be forwarded to 7726. Report scam ads to the Advertising Standards Authority, and file a report with Action Fraud or the police if you’re a victim of a scam.
Financial institutions can provide scam alerts and warnings through their website, mobile apps and social media channels to help customers stay informed about the latest threats.
Independently, users can ensure they have anti-virus software installed on their devices for immediate alerts.
By taking actions against financial scams and their impacts, parents, carers, financial institutions and social media platforms can help protect young people against financial scams on social media. As such, they can help them to safely enjoy the benefits of the digital age without falling prey to fraudsters.
The NCSC: CyberFirst: How to stay secure online
*Social Catfish: State of Internet Scams 2021 report
