Global fraud trends, COVID-19, and the importance of collaboration

The COVID-19 pandemic has resulted in significant changes to global fraud patterns, and as a result, it has substantially impacted fraud mitigation efforts worldwide. These patterns are highlighted in the most recent MRC Global Fraud Survey, and that data provides valuable insight into what strategies are working in the fight against fraud and how best to implement those strategies on a global scale. This annual industry benchmark survey, conducted in partnership between the Merchant Risk Council (MRC) and Cybersource, A Visa Solution collected feedback from 650 merchants involved in ecommerce fraud management from a variety of verticals. 

One of the most compelling takeaways is the power of cross-industry cooperation in fighting against fraud. Simply put, those that legally share information on effective fraud strategies tend to have better fraud prevention rates. A key bedrock principle of the MRC is the belief that collaboration can benefit the entire industry. This principle has never been more relevant than now, and these survey results clearly reinforce that point.

General fraud trends in the wake of COVID-19

• COVID-19 led to a surge in fraud attacks for three-quarters of merchants;
• despite an increase in the volume of fraud attacks, the range of fraud attacks experienced by merchants declined from four in 2019 to three in 2021;
• spending on fraud management has spiked, growing five-fold since 2019, as a share of ecommerce revenue.

An increased volume of attacks is precedented, but a narrower range of attack vectors is more surprising. According to the report, ‘friendly fraud, card testing, phishing, and identity theft are now the most prevalent types of attacks, impacting the largest shares of merchants, globally’.

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In contrast, account takeover (ATO) attacks have declined considerably since 2019, likely due to the growth of merchant adoption of effective mitigation tools and strategies. This trend indicates that industry-wide efforts to curb specific attack vectors can be effective, which is a promising and optimistic data pattern, supporting the idea that pooling resources and knowledge can have significant results industry-wide.

Region specific fraud patterns and mitigation efforts

Every region has unique factors that impact their payments infrastructure, economy, and ecommerce identity. Fraud attack patterns and responses vary globally, though there are many common threads as indicated by the survey results.

The data shows that while COVID-19 heavily impacted fraud rates worldwide, Latin America, Asia-Pacific, and Europe were hit particularly hard. Mid-market merchants with revenues in the USD 5 million to USD 50 million range felt the most impact.

One of the more remarkable data points pulled from this report is that first-party misuse, or friendly fraud, has become the most prevalent type of fraud for merchants in North America and APAC. In these markets, rates reported rose by 9% and 16%, respectively, compared to 2019.

The negative impacts of COVID-19 are likely a factor here: household income changes and overall financial insecurity often motivate higher rates of first-party misuse.

Thus, merchants, issuers, networks, and regulators must work together to successfully tackle this problem. Collaboration is key to the process of reducing the threat of first-party misuse.

A collaborative future for ecommerce

The Global Fraud Survey results make it clear that with a carefully considered and regulatory compliant cooperation, we can better optimise our fraud mitigation practices, and more effectively protect the billions of dollars of customer transactions traversing the payment infrastructure annually.

Here are a few data points that demonstrate the efficacy of collaboration:

• MRC members are faring notably better when it comes to preventing fraud attempts from driving similar increases in lost revenue.
• MRC members optimise fraud management costs better than non-MRC members, spending significantly less, but still achieving better results.

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Why might this be? Though there are multiple factors, it’s largely due to the collaborative values and priority on the community that MRC membership represents. MRC members share industry insights, they answer each other’s questions, they share educational resources, they connect and brainstorm at events, and they work together to ensure we all have the best possible chance of reducing fraud rates.

There were unexpected findings in the results of this survey, but this isn’t one of them. It’s no surprise that organisations that prioritise cooperation are better equipped to succeed in the ongoing fight against fraud. 

This editorial is part of the The Fraud Prevention in Ecommerce Report 2021/2022, the ultimate source of knowledge that delves into the evolutionary trail of the payments fraud ecosystem, revealing the most effective security methods for businesses to win the battle against bad actors.

About Tracy Kobeda Brown

Tracy Kobeda Brown is the VP of Programs and Technology for the MRC. She was head of product for Fragomen, Lockerz, and the CEO of Evil Genius Designs. Tracy created the American Eagle Outfitters website, ae.com, and served as CISO. She earned her Masters from Carnegie Mellon and her Bachelors in Economics from The Wharton School.

About Merchant Risk Council

The MRC is a global community connecting ecommerce fraud prevention and payments professionals through educational programmes, online community groups, conferences, and networking events. As a non-profit organisation, the MRC is headquartered in Seattle, Washington, but embraces members from across the globe.