Forter reveals fraud insights for holiday season and rising rates of omnichannel fraud

Forter’s ninth Fraud Attack Index has revealed key fraud insights for holiday season and rising rates of omnichannel fraud.

New customer accounts now represent 30% of transactions, five times more than they did pre-COVID-19. This is good news for retailers, but merchants using legacy fraud prevention systems could miss out on some of this revenue potential due to high false decline rates. Legacy systems lack data on new customers and cannot accurately distinguish between legitimate consumers and fraudsters.

The growth in transactions driven by the consumer shift from brick-and-mortar stores to online purchasing is masking the fact that the number of fraud attacks has risen in real terms, leading retailers into a false sense of security.

Omnichannel fraud is growing – BOPIS fraud rose 55% as new customer service options are subjected to significant fraud.

With transactions falling by 97% compared with H1 2019, fraud attack rates in the travel industry more than doubled, with hotel fraud attacks rising 139% and airline fraud attacks increasing 144%.

Account Takeover (ATO) and Policy Abuse such as returns abuse, promotion abuse, and reseller abuse are set to surge during the holiday season.

Forter Fraud Attack Index data tracked increases in transaction volumes across the majority of vertical sectors, but particularly those traditionally served by brick-and-mortar stores. Volumes rose 172% in Home, Furnishings and Garden, 93% in Food Delivery & Beverage and 119% in Groceries. Ecommerce fraud attacks decreased as a percentage of all transactions but in real terms, the number of fraud attacks has risen.

As retailers prepare for the holiday season and aim to recoup some of the year’s earlier losses, Forter’s research indicates that ATO attacks, and returns and delivery fraud will surge as fraudsters seek to exploit the increase in online shopping. At the same time, customers will be more likely to take unfair advantage of promotions and abuse delivery and returns policies.

Forter’s analysis indicates that fraudsters will seek to operationalize the data they’ve stolen and collected through data breaches and social engineering scams conducted during COVID-19 disruption. Also, new customer accounts opened by less experienced users are likely to use weaker passwords, fewer security steps, and be more vulnerable to ATO. As a result, retailers need to prepare for increasing ATO attacks during the holiday season.