Do you think you are vulnerable to fraud?
Our understanding of vulnerability to fraud and scams is changing. When you think of a victim of fraud, who do you picture?
The reality is that anyone can be a victim of fraud. According to national crime statistics, fraud makes up more than 40% of all crime, making it the crime we are all most likely to experience.
Yet very few people think that they could be a victim of fraud. We need to shift our thinking from imagining others as victims of fraud and start thinking about the circumstances and situations which might make us more susceptible to having money stolen through fraud and scams.
This week we are publishing two new pieces of research which improve our understanding of vulnerability and fraud. In this blog we look at how financial literacy affects susceptibility to fraud and scams.
The research
We commissioned a research agency, Jigsaw Research, to look into the links between financial literacy and susceptibility to fraud. We had three questions:
- Does low financial literacy make people more likely to experience fraud?
- What is the impact of having money stolen through fraud?
- Would education help to better protect those with lower financial literacy?
Jigsaw surveyed around 2,000 UK adults and did 15 in-depth interviews with people who had been victims of fraud in the last year. Click on the links to read a summary of the results and the full findings.
What do we mean by financial literacy?
You might have seen more people talking about financial literacy lately – politicians and campaign groups have been calling for more education. But what is it?
Financial literacy is your ability to manage your money. For this research, researchers asked whether participants felt confident across seven basic financial tasks – including managing money online, reading and understanding documents from your bank, working out budgets, and planning for the future, including investing and pensions.
60% of respondents lacked confidence in one or more aspect of money management. 13% were not confident in three or more areas – which researchers defined as lacking financial literacy.
Susceptibility to fraud
So how does financial literacy affect vulnerability to fraud? The research found that people who lacked financial literacy were more than twice as likely to have had money stolen through fraud in the last year. Almost one in every four people who lacked financial literacy had been a victim of scams and fraud in the last twelve months, compared with one in ten adults across the whole UK population.
People lacking financial literacy were most likely to have money stolen through investment, cryptocurrency, and push payment scams.
Impact of having money stolen through fraud
Victims of fraud who lacked financial literacy had a lower understanding of how scams and fraud work, which made them more vulnerable to criminal tactics. Because of this lack of understanding they were more likely to believe reassurances from the criminals who were trying to steal their money.
They were also more likely to take on the blame for the fraud rather than recognising that the criminals who stole their money are to blame. Many had a bad experience of telling friends and family that they had money stolen through fraud which reinforced their feelings of shame and embarrassment.
People say to you, why didn’t you check this…why did you fall for this – it is embarrassing…so it is easier to keep quiet.
When I told my mum and dad eventually…they said oh you silly ****** why didn’t you just check…I feel really down about the whole thing…
What would help to protect people?
Victims said they were surprised that they had not been taught more about how to manage their money in school or informed about the risks of fraud and scams. They said that better education at an early age would help to protect people like them in future. To protect adults with lower financial literacy, we need to make sure fraud prevention messaging is free from financial jargon and gives practical steps to verify information.
It’s clear that we also need to work even harder to embed a “no blame, no shame” attitude towards fraud. Feeling like it was their fault had a damaging emotional impact on the victims we spoke to who lacked financial literacy, which was reinforced when they shared their stories with family and friends. Fraud and scams are sophisticated and can affect anyone. Criminals, not victims, are to blame. Victims are not stupid; they should be supported not ashamed.