It’s fair to say that the pandemic played an influential role in how payment fraud changed and scaled in 2020. Incidentally, the relentless disruption felt across e-commerce also exposed the depth of the Fraud Economy, and the danger it poses for businesses.
Earlier this month Gina Clarke, Editor-in-Chief of The Fintech Times, interviewed Kevin Lee, Trust and Safety Architect at Sift, to discuss the biggest changes in fraud and security over the last 12-months.
The pair discussed how the fraud landscape had changed over the last 12-months, with Kevin answering that new and improved products – originally created with customer comfort in mind, had now opened more doors when it came to fraud.
In the interview Kevin said, “As the internet has grown up, people are starting to put more and more of themselves online. Certainly, with this past year and Covid, there’s been a whole bunch of new users into this space. Also, companies have had to go through their own digital transformation where they need to keep up and survive, plus, a whole bunch of other attack vectors have surfaced.
“From account take-over to content abuse. Think about loyalty accounts or how many apps you have on your phone. Even if you’re only using 10 apps a day, you might still have around 100 apps on your phone which require passcode information. We know that consumers often use the same passcodes so what that means is that if one particular company gets compromised that may hold the keys to other sites – even though they have a robust cybersecurity infrastructure in place – but the customer here is the weakest link.
“When it comes to content abuse there might not even be a physical transaction happening but in marketplaces you can come across spam and scams that offer various types of misinformation. This can often spiral into further scams.”
He also included diagrams of the fraud economy and how they affect modern working teams today.
Kevin continued, “That’s basically a snapshot of the fraud economy. Another problem that a team faces internally is the siloed team’s issue. Disparate teams such as compliance, security, engineering etc. but might not communicate as often as they should. Fraud circulates in the cracks and counts on these teams not talking to each other.
“For larger teams as well there’s a risk of general tool proliferation. I find it astonishing how many different tools a team has available. This makes it harder when teams use tools instead of talking to each other to connect the dots and much easier for fraud to proliferate.
Towards the end of the interview, Kevin outlined ways that retailers could protect themselves against new ways of attacks but also why user experience will be key to fighting fraud.
He said, “One of the biggest challenges for companies is finding new customers and retaining them, and so the strategy in eCommerce is to ask how can the business remove friction dynamically for the 99% of its customer? We’re used to locking our cars and our doors – it’s a reflex. We do it because we don’t want our stuff broken into. Now technology has caught up e.g. keyless entry, I know my car is safe but it doesn’t impede me – I don’t need to pull out my keys anymore. We’re seeing more of that now where the app or the system knows me. Whether it’s 2FA or the CVV2 code, solely for security systems. The companies that are really good at detecting fraud can then remove that in the system flow. This will then lead to higher conversions and more growth but only if the risk team can supply the right toolset.”
Kevin’s points build on a new eBook from Sift, Digital Trust & Safety Index: Exposing the Multi-billion Dollar Fraud Economy illustrates through new data from Sift’s global merchant network a complex, interconnected Fraud Economy of known vectors and emerging threats, with the majority of attacks serving as stepping stones towards high-return payment fraud—and the potential to cost online businesses resources, profits, and growth at every touchpoint.
Sift’s Trust and Safety Architects credit these higher value attacks and ballooning fraud rates to the challenges e-commerce businesses faced under coronavirus restrictions: too many people cooped up at home, misinformation causing changes in consumer behaviour, dormant user accounts, and fraudsters watching from the wings, ready to take advantage.
Other key points in this report include:
- The contributing factors to the 69% year on year surge in attempted online payment fraud
- How fraud vectors have evolved from siloed incidents into an interconnected Fraud Economy, with the majority of vectors leading to payment abuse
- Details of a sophisticated fraud ring attacking fundraising sites with automation
- The industries, items, and payment types most targeted by cybercriminals in 2020
To explore in full, you can download the eBook Digital Trust & Safety Index: Exposing the Multi-billion Dollar Fraud Economy here.