Payment Fraud: The Fraudster’s Weapon of Choice
Consumers are bringing more of their lives online, from their social interactions, their work and, in particular, their shopping. Unfortunately, just as consumers are taking advantage of their online-centric worlds, so are fraudsters. By implementing more sophisticated tactics to take advantage of new fraud opportunities, such as account takeover, fake content and fake reviews, across a variety of industries, fraudsters are posing even more of a threat to retailers.
Sift’s recent Fraud Aftershock Index proves that fraud is no longer a one-dimensional threat, but rather an interconnected web with multiple targets and approaches of attacks. In fact, according to the Index, fraudsters are exploring many types of attacks, such as fake content, fake accounts, etc., and are not limiting themselves to any one industry.
To illustrate this fluidity and movement, the Index measured two types of fraud: fraud type aftershock, which depicts the types of fraud being committed, and industry aftershock, which depicts the industry in which the fraud is taking place.
Fraud Isn't a Singular Threat: Understanding the Multidimensional Ways Fraudsters Attack
There are many types of fraud that retailers are susceptible to — fake content, fake accounts, account takeover and more — all of which are more connected than most companies assume. For instance, 81 percent of fraudsters who start in payment fraud branch out to fake content.
Understanding the various types of fraud allows retailers to not only protect their businesses, but also their reputations. Fake accounts, created by bots or fraudsters, may impact a brand’s bottom line and reputation by posting fake reviews of products, for instance. Ninety-three percent of consumers state that online reviews impact their purchasing decisions, proving the harmful effect that negative reviews can have on customer retention and loyalty.
E-Commerce May Not Always Be the Original Target, But it’s Still at Risk
As fraud becomes multidimensional and fluid across industries, predicting which direction fraudsters are most likely to attack from becomes more difficult. Paying attention to fraud trends and breaches across a brand’s respective industry is no longer an accurate indicator as to where a fraudster will hit next, it simply depends on where an attack would be successful. For example, a breach in one seemingly unrelated industry could mean retail is the next target.
For instance, fraudsters that start in education are five times more likely to commit fraud in e-commerce.
The Patterns of Fraudsters: Understanding How Fraudsters Will Strike Next
There are, however, predictable patterns associated with the movements of fraudsters and the types of fraud they're most likely to attempt. For instance, fraudsters who start in payment fraud are 81 percent more likely to jump to fake content, as opposed to other forms of fraud.
By understanding these patterns, retailers can better prepare themselves by building up payment defenses or considering potential content abuses in advance, for instance, to safeguard against a potential attack, regardless of the fraudster’s origin.
Outsmarting the Fraudster: Understanding How Retailers Can Safeguard Against Fraud
Fraudsters are resourceful and ever evolving, but — thankfully — so is the technology needed to safeguard against attacks.
However, many retailers still rely on outdated processes and strategies like rules-based fraud prevention systems, which apply a one-size-fits-all approach that can both insult legitimate customers and miss real instances of fraud. Shifting to a digital trust and safety mind-set — one that aligns risk and revenue decisions, supported by processes and technology — can help retailers better prepare for and protect against fraud without applying unnecessary friction to real shoppers.
By combining a digital trust and safety strategy with an understanding of how fraudsters move across industries and attack types, retailers of all sizes can protect their brands, customers and their bottom lines, and they can prevent falling victim to the whims of a fraudster.
Jeff Sakasegawa is a trust and safety architect at Sift, the leader in digital trust and safety, empowering companies of all sizes to unlock revenue without risk.
Related story: Fake Reviews Causing Shoppers to Abandon Retail Brands