Fast thinking instead of slow is the great enabler of digital fraud

Technology has short-circuited how we apply our minds—with baleful effects we need to be wary of

- VIVEK KAUL

If you are the kind who reads the inside pages of newspapers, you may have noticed a surge in fraudulent digital arrests, WhatsApp money transfer scams, online Ponzi schemes, deep-fake videos of famous people recommending some fraudulent investment and investors losing money on financial derivatives. The digital system as it has evolved is at the heart of such things.

Until a few years ago, selling an idea or an investment scheme required gathering people in a room. Also, threats had to be made face-to-face or by a phone call; a 'digital arrest' was inconceivable. And frauds lacked scale.

The digital economy has broken this dynamic, allowing scamsters to reach more people quickly and also reducing the gap between someone receiving a proposition and thinking and acting on it. This encourages what the Nobel prize-winning psychologist Daniel Kahneman referred to as 'System 1 thinking.'

As Richard Thaler and Cass Sunstein write in Nudge: "It is useful to imagine the workings of the brain as consisting of two systems. One is fast and intuitive [System 1]; the other is slow and reflective [System 2]."

Let's consider the WhatsApp money transfer scam. The year is 2015. A friend messages you asking for some money. Chances are you would have had to find a computer, log into your bank account, add them as a beneficiary and then transfer money. While doing all this, you might have just called your friend and discovered that their WhatsApp account has been compromised. Of course, hacking a WhatsApp account in 2015 would have been far more difficult.