Large, all-encompassing historical events have the ability to change the way that society operates. These changes happen rapidly, but our adaptability ensures a sense of normality in unusual circumstances.
In the case of the pandemic, businesses, and the way they operate, changed swiftly. But for the same reason that some businesses thrived during the pandemic, fraud also saw a new era of innovation. The same technology that allowed many businesses to continue operating while working from home also allowed fraud rings to continue their damaging efforts throughout this period.
Fraud rings have adapted to the new circumstances, using the pandemic as an opportunity. With the emergence of these new fraud opportunities, we must become aware of them as quickly as they have risen.
Fortunately, new data from Signifyd’s Pulse Report reveals why fraud is growing, with key transactional insights on the rising trends to watch out for. Here, we explore what fraudsters are doing and how you can avoid their abuse.
Fraudsters are innovating
This new era of fraud innovation has become more pronounced than traditional forms of payment fraud, particularly online. As the volume of ecommerce has grown, in part due to the pandemic, and as the digital world has increasingly become all our worlds, fraudsters have sought out a variety of ways to take advantage of merchants and consumers.
In a May 2021 report from 451 Research, significant fraud trends were highlighted: “Bad actors are broadening their focus beyond payments, targeting touch points across the customer journey.
“Touchpoints from online account creation through to product returns have emerged as growing vectors for fraudulent activity, and consequently, both financial and reputational losses.”
We should always remember that these fraud rings are for-profit enterprises. And these fraudsters are continually looking to expand their total addressable market, just as a genuine business would. So as merchants have become better at protecting themselves from payment fraud with solutions like Signifyd’s Commerce Protection Platform, fraudsters have expanded into non-payment forms of fraud.
Return fraud is a significant focus of nearly every enterprise that works with Signifyd, according to their Pulse Report. Return fraud is the practice of buying a high-value item and returning some lesser-value item for a refund.
Key fraud trends to watch for
So what are the big fraud trends that have arisen during the pandemic and continue to flourish today? Understanding how fraudsters are abusing your business is the best way to prevent them from continuing to do so.
Fraudsters that recruit go-betweens are hardly a new trend. While its prominence may rise and fall, every blip in mule fraud activities comes with innovations.
During the pandemic, the use of mules has increased sharply. Fraud rings rely on armies of dispersed mules to receive stolen goods and forward them to re-shippers and out of the country, but it appears to have subsided since the pandemic.
Avoiding the point in the payment process where barriers to fraud are typically the greatest, account takeover fraud allows fraudsters to find an area of attack outside the checkout process. The increasing use of bots plays into this trend, as automation allows fraud rings to attempt to breach thousands of accounts in quick succession.
Fraudsters can make consumer identities from scratch — or more accurately from a mixture of stolen and self-generated personally identifiable information. Often starting with a stolen National Insurance Number — usually a child’s because there will be no credit history — the fraudster makes up a name, cooks up a billing address, and applies for a new credit card.
Order online, steal from the store
The pandemic saw a rise in purchases made online and then picked up in store or at the curbside. The behaviour persists today. In fact, Signifyd data shows that buy online, pick up at or in the store orders remain 210% higher than they were pre-pandemic. And with the BOPIS spike and continued popularity came a great opportunity for those with a criminal bent.
You don’t need a delivery address when you buy online and pick up at the store — a key signal in fraud protection. And by their nature, they need to be filled fast, leaving little or no time for manual review or pondering the legitimacy of an order.
We’ve seen massive rises in abuse beyond traditional payment fraud. Take policy abuse, for instance, or the practice of breaking the rules for discounts or consideration shoppers get for referring a new customer to a merchant.
Keeping up with fraud detection
While fraud continues to innovate, utilising new trends and technology, so must businesses and their fraud detection techniques. Any fraud and abuse come with behaviour, developing a trail that can be tracked and assessed.
While technology has allowed fraudsters to increase their use of bot attacks, chargebacks and more, intelligent machine learning is also able to tackle abuse and fraud from the root. By understanding the dynamics of fraud, continually learning from buying behaviour, and seeking out potential risks, commerce protection platforms have the ability to identify fraud and block abusive transactions.
These innovations now allow us to accurately block fraud while providing positive experiences for genuine customers. Ultimately, businesses can avoid the golden age of fraud, boost their revenue, and get a leg-up on their competitors.