Online scammers – nature’s behavioural economists?

Buyer beware, especially online

A recent episode of ABC Radio National’s The Money was devoted to online scams and the tricks that scammers use to defraud, humiliate and sometimes blackmail victims. In fact, you could argue that con artists are behavioural experts. They know how to target our weaknesses and manipulate our emotions in ways that can have devastating impacts.

According to the Australian Securities and Investments Commission (ASIC), Australians are losing around $3 billion a year to personal fraud. Over half of the adult population is estimated to have been touched by online scams and fighting scammers is made even more difficult because many people unaware that they’re  being ripped off.

Many also go into denial when they have doubts and then are too ashamed to report these crimes.

Clicking the right buttons

Romance scams – online relationships where one side manipulates the other for financial gain – are very lucrative and can cause the most damage, financially and emotionally.

Scammers know how to push our behavioural and emotional buttons and how to override the sceptical, reasoning parts of our brains. Reading that someone loves you, that they will do anything to be with you, sends a hit of the pleasure hormone dopamine to the brain.

It works the same way gambling and drugs like cocaine do, giving us a warm and happy feeling. And we can go back and re-read these electronic love letters to get that hit over and over again.

Scams don’t have to be emotional or even personal, they can be so ordinary it doesn’t even raise an eyebrow. Random invoices are sent to large businesses all the time for small amounts – say $93.87 – in the hope that someone will simply pay up.

A few thousand successes and you have a lucrative racket.

Hacking the human psyche 

One of the oldest and simplest ways scammers overcome the rational, sceptical parts of our minds is speed.

We’re asked to do something quickly, before we can weigh up the consequences; the scammers need cash now. And even as doubts about these people grow, as it becomes obvious that we have made a mistake, we suppress these thoughts. 

This is called Cognitive Dissonance, or holding two contradictory thoughts in our minds. We ignore the truth when it threatens our self-image. Anchoring is another bias they have learnt to exploit.

You get an offer of $100,000 – say an inheritance or lottery win – and all you need to do is pay a paltry $500 transfer fee.

The first big amount is the ‘anchor’, so the second amount seems a pittance to pay.  But you have to act fast…

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And when you finally realise this has all been a waste of your time and money, the scammers play the blackmail card; they’ll post those images you sent unless you pay up.

In some cases they’ve been paid and gone ahead and posted anyway.

It has devastated people’s lives.

Who’s at risk? 

Most of us think we wouldn’t fall for a scam, but they work on an emotional level, not a rational one.

It’s a bit like falling in love with the wrong person; it happens all the time.

Those at most risk are people who are more addictive personalities, high on impulsivity, especially those who can’t help but react quickly.

Those with an internal locus of control – who believe they themselves control most aspects of their lives – are often vulnerable because they think (ironically) it can’t happen to them.

And our online behaviours can attract scammers; people who spend lots of time shopping online, posting pics of themselves, oversharing, using instant messaging, they are already in that online world of virtual relationships.

Spending less time in the real world is a risk factor. Listen here.

Image with thanks to Dennis Skley via flickr.