Scams are a global problem – not just for consumers, but for the merchants that serve them. Scammers succeed when they can elicit trust from their victims. Merchants succeed in much the same way, as building brand trust is essential to patronage and continued loyalty.
Unfortunately, when scammers leverage trusted merchant brands to perpetrate their schemes, there are knock-on effects for the merchants themselves – the implications of which cannot be ignored. Given these implications, merchants have an unquestionable role to play, but ending the pandemic of scams necessitates a more inclusive approach – one that involves true partnerships with the financial services industry, telecommunication providers, technology firms, law enforcement, and, most importantly, consumers.
Merchants spend years and invest extensively to develop and enhance the value of their respective brands, and those brands are under attack. Just as with merchandise, bad actors target merchant brands to enrich themselves – regardless of the cost to the affected merchants. In fact, more than one in five of the most impersonated brands belong to merchants. Phishing emails, smishing texts, and vishing calls are wrapped in the patina of a trusted brand to encourage victims to engage. And once they do, it’s only the scammers who win.
The goal of every scammer is to walk away from each interaction richer than when they started. Whether that involves convincing a victim to send them funds under false pretenses or simply sharing information that makes it easier for the scammer to succeed at some point in the future, everything they do is designed to take from their victims and avoid being detected until it is too late to undo the damage. And they are very good at it – in the US alone, consumers lost nearly USD 9 billion to scams in 2022, while Australian consumers lost USD 3 billion to scams that same year. These figures are substantial, but they represent only a part of the damage caused.
When scammers successfully imitate the brands of merchants, the trust that consumers have in those brands begins to decline. Although it may be difficult to measure the decreased value of a brand that has been misused by scammers, it is quite straightforward to measure the effects of reduced brand trust. These include:
Decreased click-through rates: victims of a scam will be less inclined to click on links – which could include legitimate marketing outreach from merchants to which they were once loyal. This, in turn, leads to fewer purchases and less revenue for oft-imitated merchants.
Increased transaction costs: even if the victim is not fully deterred from engaging with a merchant’s brand in the future, they may, instead, choose to be more cautious and engage with merchants in higher-cost channels where they feel greater certainty that they will have a legitimate interaction with the merchant.
It is important to note that the effects of scams, especially on consumers, are not lost on legislators and regulators who are now looking to service providers to make victims whole. In Australia and the UK, banks, telecommunication providers, and social media companies are on notice.
However, merchants can also serve as platforms for scammers – especially those with marketplaces where bad actors hide behind the merchant’s brand to fleece consumers. In this case, Singapore has specifically called out ecommerce merchants in some of their recent legislation. The fact of the matter is that governments around the world are influenced by each other’s actions, placing every type of organisation – including merchants – in the crosshairs for greater oversight.
Between financial losses, the impact on customers, and the potential for increased liability, merchants must act decisively and holistically, and this includes steps such as:
Identifying and taking down imitation websites and rogue apps;
Rooting scammers out from inside marketplaces by improving identity verification;
Educating customers about scammers’ efforts to imitate and manipulate;
Training customer service agents on how to identify and support customers who are being manipulated by scammers;
Introducing tactical delays to gift card purchases to ensure customers aren’t playing into a scammer’s hands;
Leveraging technology that can detect scam activity during online and mobile transactions.
Knowing now that organisations in other industries are just as incented to act, merchants should seek to partner with financial institutions, telecoms, and social media companies to share information on suspicious activity and coordinate efforts to detect and prevent scams. Together, bad actors can be identified more quickly and stopped in their tracks. Furthermore, coordinating with law enforcement demonstrates a public commitment to solving this problem – which legislators and regulators yearn to see.
Scammers are coordinated and well-organised, which is why they thrive when their victims are isolated. By joining hands with other organisations and the consumers they all serve, merchants can act from a position of strength that enables them to frustrate scammers, protect their brands, and secure the customer relationships that they worked so hard to build.
This editorial is part of The Paypers' Fraud Prevention in Ecommerce Report 2023-2024, the ultimate source of knowledge that delves into the world of fraud prevention, revealing the most effective security methods for companies to stay one step away from bad actors and secure their businesses.
A recognised authority on cybercrime, Al most recently co-founded Breach Clarity, an award-winning data breach intelligence provider acquired by Sontiq (a TransUnion company), and previously served as Head of Fraud and Security for Javelin Strategy & Research, where he directed the company’s oft-cited research and analysis on consumer identity theft trends. Prior to Javelin, Al cut his teeth fighting fraudsters at FIS, Goldman Sachs, and HSBC.
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