The Role of Financial Literacy in Financial Fraud Prevention - A Literature Study

Abstract

                The Financial Industry is presently going through a digital transition in terms of Business Models, services, and products. Automating the majority of conventional monetary transactions and other associated services is the goal of this digitization. As a result, identifying financial transaction fraud has emerged as a key challenge for all Financial Institutions. Due to Global Communication and contemporary technologies, fraud has risen significantly and caused considerable damage. Digital Financial Literacy is the need of the hour. It aims to inculcate basic Financial Knowledge among its users to enhance their Financial Behavior and Financial Decision-Making ability. A new idea called "Digital Financial Literacy" highlights the abilities and information required to conduct financial transactions via digital channels.

                Improving Financial Literacy is essential for enabling better Financial Decision-Making and advancing the long-term financial security of people, families, and the country at large. It is expected that a higher level of Financial Literacy, especially among younger generations, will lead to better economic metrics, better payment histories, and more manageable debt levels for individuals and the country.

                Financial fraud occurs when individuals lose their money by dishonest, unlawful, and fraudulent means. People must become more knowledgeable about financial crime detection and prevention. Cyber experts assert that the primary cause of the rise in financial crimes is a lack of awareness. The first step in identifying financial fraud and stopping it is having a solid understanding of finance. Fraudsters target anyone with money, even the elderly close to retirement and younger people who might even know little about finance. On the other hand, women, young teens, and the elderly are simpler targets. There are several ways that financial crime is perpetrated, including mass marketing fraud, mortgage loan fraud, investment fraud, and identity theft.

                Nonetheless, there is always a danger associated with financial transactions, whether they are carried out physically or digitally, although this risk can be reduced with awareness. Being financially savvy is essential to lowering the chance of falling victim to financial fraud, as criminals take advantage of people's inexperience to carry out these schemes.