The psychology of scams and why we fall for them

BBC North presenter Peter Levy was recently the victim of a convincing scam that resulted in him losing almost half of his life savings.

Somebody claiming to be from Levy’s bank contacted him, warning of unusual activity on his account, and asked him to log in to perform some security checks. Unfortunately, he unwittingly shared sensitive information with scammers, allowing them to gain access to his account and steal his savings.

Luckily, the BBC reports that Levy immediately contacted his bank and they helped him recover his savings. Yet not everybody is so lucky, and many people lose significant amounts of money to scammers each year.

Indeed, according to the Guardian, people in the UK lost around £2.3 billion to fraud in 2023.

Peter Levy reported feeling “ashamed and embarrassed” for trusting the scammers but he needn’t blame himself for what happened. We’re all vulnerable to scams because criminals use advanced methods, often preying on our psychology to make us act in ways that we otherwise wouldn’t.

Fortunately, by understanding how these scams work, you might find it easier to protect yourself.

Read on to learn about the psychology of scams and why we fall victim to them.

Scammers engage your emotions to push you towards quick decision-making

Many scams rely on the victim making a snap decision and handing over sensitive information before they have a chance to think about what they’re doing. To achieve this, scammers often take advantage of “two-system thinking”.

The two-system thinking theory was developed by psychologist Daniel Kahneman and used to explain how we make decisions. He stated that our brain has two modes of operation: “System 1” and “System 2”.

System 1 makes automatic decisions, often based on impulse and emotion. We face thousands of small choices every day and we need System 1 to make them quickly, without too much analysis, or we would suffer from cognitive overload. It’s believed that System 1 makes around 98% of our decisions.

System 2 makes the other 2% of our decisions. This is a more rational thought process that analyses data to make informed decisions. We activate System 2 when we’re performing more complicated tasks that require mental exertion such as looking for somebody in a crowd or playing a game of chess.

Scammers may find ways to play on your emotions and push you towards System 1 thinking, stopping you from engaging System 2. In short, the perpetrators want you to make a fast decision, not a logical one.

Peter Levy experienced this when he was contacted by somebody posing as his bank and warning of suspicious activity. They deliberately created a sense of panic so instead of engaging System 2 and considering checking whether the call was fraudulent, System 1 took over and he made a snap decision to share his details.

Investment scams often drive System 1 thinking by creating time pressure. They may offer the promise of guaranteed returns but only if you invest now, meaning that you make a quick decision before you have time to consider the situation logically.

That’s why it’s important to take a moment to question the motive of anybody who contacts you. The “Take Five” campaign is a national initiative that encourages consumers to stop and think before sharing personal details or transferring money, regardless of the situation.

The “psychological principles of influence” can trigger an emotional response

Psychologist Robert Cialdini developed seven “psychological principles of influence”, which are essentially mental shortcuts or biases that can manipulate our thinking.

The psychological principles of influence are:

  • Commitment – We typically want to be seen as consistent in our beliefs and actions.
  • Social proof – We’re more likely to do something if we see other people doing it first.
  • Authority – We often respond to authority figures and obey orders they give us.
  • Liking – The more we like a person or organisation, the more we will be persuaded by them.
  • Scarcity – When we believe something is scarce, we often want it more.
  • Unity – If we feel included, we’re more likely to participate in activities.
  • Reciprocity – We often feel obliged to repay favours and debts.

Scammers often use these mental shortcuts to persuade unsuspecting consumers to share personal information. For instance, you might receive a phone call claiming to be from HMRC informing you that you need to make a payment. This engages the “authority” shortcut and could lend legitimacy to a scam call.

Alternatively, you may receive an email that appears to be from a business offering you a free coupon if you click a link. The “reciprocity” shortcut might make you feel as if you owe something to the business, meaning you’re more likely to click the link and unknowingly give scammers access to your device.

Posing as a recognisable institution such as a bank could also trigger the “social proof” or “liking” principles of influence.

When scammers press these psychological buttons, you might act in ways that you otherwise wouldn’t and make riskier decisions.

You’re more vulnerable to scams when you’re preoccupied or tired

When you’re tired or preoccupied with work and other responsibilities, you might not think as clearly, and this could make you more vulnerable to scams.

This is because, if you’re busy and your brain is already juggling a lot of information, you might be more likely to slip into System 1 thinking when making a new decision. Additionally, your emotions could be heightened if you’re excessively tired or stressed, meaning it may be easier for scammers to take advantage of the psychological principles of influence.

Unfortunately, scammers deliberately target people at times when they’re most likely to be preoccupied. Indeed, the Independent reports that in a survey of 3,000 people who had been scammed in the past two years, 43% of them fell victim to fraud in the afternoon. The survey also found that Wednesday and Thursday were the days when you’re most likely to be targeted.

Further to this, 20% of people said they had other things on their mind when they were scammed and 15% said they were feeling tired at the time.

As such, you may need to be more cautious about scams at certain times, especially when you’re busy or distracted. It’s also important that you recognise when psychological patterns take over and inform your decisions, so you can take a step back and potentially avoid scams.

Get in touch

We can act as an impartial adviser to help you protect your wealth from scams.

Please contact us at hello@ardentuk.com or call 01904 655 330. As an award-winning financial advice company with advisers included in the 2024 VouchedFor Top Rated guide, you can be sure that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

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