What’s Trending in Online Fraud?

Online fraud attacks are on the rise, and the means by which fraudsters are attempting to exploit online merchants are growing increasingly more sophisticated. Businesses across all industries need to have a better understanding of which fraud attack techniques are trending and how to adapt their fraud prevention strategies to better safeguard their bottom line and protect their customers.

In Brief

Data breaches in 2018, in conjunction with the interconnectedness between an individual's' online and real-life identities, means criminal access to personal data has never been richer. Fraudsters are ramping up the means by which they launch attacks, increasingly working in tandem with other criminals through fraud rings or through leveraging criminal networks to access phishing kits or “crime-as-a-service” opportunities. The result is that the bar has been lowered for entry and the extent of the damage they may be able to cause has been expanded.

Fraud rates across the board increased in 2018. Fraud attacks increased most significantly for food and beverage merchants, rising by 79 percent. This increase was followed by electronics (73 percent), digital goods (66 percent), apparel and accessories (47 percent), and jewelry and luxury, and travel (each at 19 percent).

But how do fraudsters attack to fully take advantage of online merchants?

Policy Abuse

Policy abuse, which includes things like coupon abuse, referral abuse or the creation of multiple accounts in order to leverage site-specific rewards, saw an increase of 170 percent. These types of abuses aren't typically top-of-mind for most retailers. Instead, their focus usually remains on transactional fraud. However, policy abuse continues to grow, posing a significant threat to retailers’ profit margins.

Account Takeover (ATO)

Transactional fraud is no longer the biggest nor only concern for online retailers. Fraudsters have found there's much more value in leveraging an individual’s account rather than in committing simple transactional fraud. As such, Forter noted a 45 percent increase in account takeover (ATO) attacks by the end of 2018 compared to the beginning of 2017.

ATO attacks give online criminals access to all of an individual’s personal and private data. Once they gain access, fraudsters can exploit reward or loyalty programs and make illegitimate purchases, all without raising any immediate suspicions.

Fraud Rings

Fraudsters are increasingly banding together to take advantage of merchants. Forter has seen that the returning individual offender rate has decreased in response to the rise of fraud rings, which have grown by 26 percent this year. Fraudsters have found success working together, understanding that there's great value in joining a group that will leverage the expertise and unique skill sets of group members, to do damage at scale.

Instrument Manipulation

Instrument manipulation has also increased over the last year. Hardware and mobile devices are now cheaper and easier than ever to procure, and fraudsters are using burner phones, virtual machines, bots and remote desktop protocol (RDP) more often. As such, instrument manipulation has increased by 13 percent.

The Bottom Line

Fraud is on the rise.

No matter the vertical, retailers need to be aware of the shifting trends in how fraudsters attack, where they have the most success, and how to better protect their business and customers. The latest Fraud Attack Index indicates that transactional fraud is no longer the only focal point for fraud. Instead, trends indicate that touchpoints along the customer journey and the procurement on an individual’s account is where the more highly valuable exploitation lies.

Increasingly sophisticated methods of attack like fraud rings, bot attacks and manipulated devices, in conjunction with the realization of the value of an individual’s account, means that retailers need more advanced methods of detecting and preventing innovative types of fraud.

For further details about how online fraud developed over 2018, download the full report.

Michael Reitblat is co-founder and CEO of Forter, a fraud prevention solution provider.