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Digital Wallet Payment Fraud up by 200% In Q1 2022 Finds Sift

The Q1 2022 Digital Trust & Safety Index, detailing the increasingly sophisticated—and often automated—tactics cybercriminals leverage to commit payment fraud, has been published by Sift, a digital trust and safety company.

Derived from Sift’s global network of over 34,000 sites and apps and a survey of over 1,000 consumers, the index reveals that the payment fraud attack rate (the rate of fraudulent transactions blocked by Sift out of total transactions) across fintech ballooned 70 per cent in 2021—making it the highest increase across any vertical in Sift’s network. The increase in payment fraud also correlated with massive 121 per cent growth in fintech transaction volumes on Sift’s network year-over-year, making this sector an attractive target for cybercriminals.

According to Sift’s analysis, these rising attacks that were blocked were aimed primarily at alternative payments like digital wallets, which saw a 200 per cent uptick in payment fraud, along with payments service providers (+169 per cent), and cryptocurrency exchanges (+140 per cent).

Sift has specifically seen these abuse tactics aimed at buy now/pay later (BNPL) services, which saw a 54 per cent year-over-year uptick in fraud attack rates. In late 2021, Sift’s trust and safety architects discovered a growing number of fraud schemes on Telegram offering unlimited access to BNPL accounts through fake credit card numbers and compromised email addresses—showcasing the array of methods actors in the fraud economy are using to target the entire fintech sector.

The hidden brand impact of payment fraud 

Along with network-wide growth in average daily transaction volumes across every industry, Sift saw an overall 23 per cent surge in blocked payment fraud attacks in 2021. Concurrently, nearly half of survey respondents (49 per cent) report that they’ve fallen victim to payment abuse over the past one to three years—and 41 per cent of the victims experienced it in the last year alone. Of those victims, nearly one-third (33 per cent) identified financial service sites as the ones that pose the highest risk, which could negatively affect customer trust in the industry.

“Many brands fail to realise that the damage of payment fraud goes beyond the initial financial impact,” said Jane Lee, trust and safety architect at Sift. “The vast majority of consumers report abandoning brands after they experience fraud on a business’s website or app, diminishing customer lifetime value and driving up acquisition costs. Further, potential customers who see unauthorised charges from a particular company on their bank statements will forever associate that brand with fraud. In order to combat these attacks and grow revenue, businesses should look to adopt a digital trust and safety strategy—one that focuses on preventing fraud while streamlining the experience for their customers.”

Tackling the fraud economy with Sift’s Fraud Intelligence Center

To help trust and safety teams better understand the intricacies of the Fraud Economy, Sift has launched its new Fraud Intelligence Center. Leveraging data from Sift’s global network of 70 billion events per month, the Fraud Intelligence Center will provide trust and safety professionals with the latest data, trends, and expert analysis they need to fight back against the fraud economy.

Author

  • Francis is a junior journalist with a BA in Classical Civilization, he has a specialist interest in North and South America.

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