The Catfish. The Reject. Attack of the Bots. These aren’t upcoming horror movies – they’re examples of fraud scams experienced by consumers and businesses alike. In the US alone, consumers lost $246 million from online shopping fraud in 2020, according to the FTC. For businesses, the threat is even greater: omni-channel brands and retailers are constantly at risk of data breaches and organized retail crimes.
Fraudsters take advantage of outdated legacy systems and security loopholes, which in turn damages a brand’s reputation, sometimes permanently. Hacked eCommerce sites and stolen payment card numbers are some of the primary reasons customers walk away from brands.
Battling fraud can feel futile. But advancements in AI and machine learning can help organizations be more proactive about securing data and spotting patterns of fraudulent behavior. Let’s look at some examples of fraud, what consumers are worried about, and what a business can do to secure its brand and protect its reputation.
All Industries Report an Increase in Fraudulent Behavior
According to a report from the Association of Certified Fraud Examiners, 79 percent of respondents have observed an increase in fraud since the beginning of the COVID-19 pandemic. 90 percent of respondents anticipate that this trend will continue well into 2021. Specific types of fraud cited were malware and ransomware attacks and credit card fraud. For brands and retailers, credit card and payment fraud, both by individuals and organized retail criminals, is an urgent issue.
Retail and eCommerce fraud can manifest in several different ways:
Catfishing: bad actors will contact a company’s customer service department and manipulate employees, usually with a sad or sympathetic story, into waiving fees or giving them discounts or free products.
Bots: Automated attacks by hackers can acquire customer data, including credit card numbers, or take over accounts. Bots may also scoop up large quantities of limited-edition products, shutting out real customers. Especially for brands, ordering large quantities of goods and selling them on resale markets dilutes its reputation.
Inside jobs: Employee collusion in either stealing products, or helping outsiders abuse a company’s return and exchange policy.
However, all of these types of con jobs have something in common: a data trail. An organization can use that data to its advantage, with the right tools.
Consumer Fears Drive Fraud Protection
According to a report from Experian, 74 percent of consumers said security was the most important factor when deciding to engage with a business online. Consumers lose billions of dollars every year to credit card theft, hacked accounts, and phishing scams. And it’s only gotten worse: with the onset of the COVID-19 pandemic in early 2020, eCommerce shopping skyrocketed, along with scams like account takeover (a fraudster gaining access to a user’s online account and making unauthorized purchases or stealing credit card numbers).
Bad actors like Bargain Bear are an example of an organized crime ring dedicated to online fraud. There are many ways gangs like Bargain Bear perpetrate scams – content abuse, like stealing trademarks and product images to use on shady websites, exploiting security flaws in eCommerce sites to steal customer account information and credit card numbers, or using a brand’s eCommerce site as a testing ground for stolen credit cards.
Even just the perception of fraud can turn customers away. Forget about the financial losses – the impact to a brand’s reputation from this kind of behavior can be ruinous.
So, what can organizations do to combat fraud? Experts recommend taking a three-pronged approach:
Assess risk: Review data from the past six to eight months for suspicious patterns of transactions, unusual behavior, or other anomalies.
Invest in anti-fraud technology: If you’ve already invested in fraud analytics or cybercrime monitoring projects, great. Otherwise, it’s time to assess your options — especially for high-volume businesses like online retail. Fraud protection technology can be an important safeguard for the brand.
Monitor remote work: The sudden shift to working from home for many industries has opened security gaps. Inappropriate security roles can create loopholes that unethical employees can abuse. Companies’ remote workers who are under pressure to perform, combined with the stresses of working from home and the pandemic, can be prone to making more mistakes. Checking in more often is important, since red flags for fraudulent activity from employees may go unnoticed while working from home.
How Companies Can Mitigate Fraud Losses
In the past, fraud used to be securely within finance’s domain. But today, it impacts an entire organization. Customer service, retail, IT, and eCommerce professionals must work with their organization’s finance team to gain a complete picture of the systems security landscape. Tools like Microsoft Fraud Protection can protect both users and organizations from bad actors and fraudulent activity. With Fraud Protection, adaptive AI technology continuously learns through advanced machine learning and a unique connected knowledge graph to spot suspicious account activity, transactions, bots, and consumer behavior in real time.