Fraudsters haven’t been idle during the pandemic. They are constantly looking to exploit any and all vulnerabilities – including global crises. Experts estimate that more than USD 1 trillion was lost globally to cybercrime in 2020.
One of the challenges facing ecommerce businesses, and a major reason fueling an increase in fraud, is the growing Fraud Economy – the interconnected web of fraud and abuse types that fuel one another. But what exactly is the Fraud Economy and how can fraud fighters stay one step ahead?
The fraud landscape is changing
Cybercriminals are knowledgeable about the markets they target and skilled at skirting around security measures put in place by fraud teams. They have moved on from isolated attacks into a full-blown Fraud Economy – a very complex ecosystem where one fraud type acts as both a springboard for, and a bridge between, other fraud types.
The Fraud Economy operates just like traditional economies, with levels of skilled labour as well as the ebbs and flows of supply, demand, and pricing. Fraudsters operating in this economy utilize secondary marketplaces to buy and exchange stolen information, oftentimes on the dark web.
Throughout the recent years of digital transformation, online fraud has multiplied into a much larger landscape of abuse. In the below graphic, you can see the complexities of the Fraud Economy and the various methods fraudsters can enact to get away with account takeover, content abuse, and payment fraud.
The impact of the Fraud Economy
Digital shopping carts ballooned in 2020, as internet traffic surged 50%-70% and the amount of money spent by online shoppers nearly doubled. This may have been a welcome sight to merchants weary about how the pandemic would impact their business, but the jump in online spending left many unprepared for the subsequent rise in cybercrime. The average value of fraudulent purchases increased by 69% year-over-year.
When we examined data from Sift’s global network of customers, representing over 34,000 sites and apps using Sift, we saw attempted fraud increase dramatically, driving year-over-year fraud rates wildly high in some industries. Loyalty merchants, which help businesses engage their customers, saw fraud rates jump by 275% as compared to 2019, while omnichannel retailers saw an increase of 50%.
How can you protect your business?
Cybercriminals have demonstrated that they can, and will, apply sophisticated strategies and adopt cutting-edge technology to execute the most profitable attacks possible against online merchants.
To fight the Fraud Economy, merchants need to examine the entire customer journey – from account creation to making a purchase and posting a review. Automation is key to protecting customers every step of the way. Businesses should leverage a machine learning solution that can analyse thousands of signals and look for patterns to determine levels of risk, and that has access to a global network. With machine learning, you’re able to digest large amounts of data pertaining to geographic data, behaviours, device information, and more to detect bad actors.
To learn more about the Fraud Economy, download our recent Digital Trust & Safety Index report and discover more insights to protect your business and help it flourish.
About Jane Lee
Jane specializes in spam, account/content abuse, and payments risk. Prior to joining Sift, she was on fraud teams at Facebook and Square, and also spent some time as a Private Investigator. She is passionate about designing and operationalizing systems for detection and enforcement of fraud at scale.
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