The holiday season is e-commerce’s great amplifier. Everything gets bigger in the holiday season — pageviews, orders, shipments, revenue and hopefully profit.
But amid all the holiday cheer and chaos, one holiday tradition fills digital retailers with dread: Online fraudsters and their ever-evolving methods to turn the season of giving into a season of taking.
E-commerce fraud, of course, is a year-round problem. But just as sales spike in November and December, so do opportunities for those lurking on the dark side of the internet. And while retailers need to be on guard against the old tactics of nefarious online dealings, they must also be watching for the new ways cyber-crooks game the system.
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The Latest Twist in Online Fraud
The latest twist: Formal online courses that help fraudsters hone their game and expand their inventory of stolen financial information. Those stolen financials, of course, allow criminals to place fraudulent orders with e-commerce shops that haven’t braced for the assault.
Risk management company Digital Shadows uncovered the online fraud schools in a study of the dark web’s role in trafficking stolen credit information. For less than $950, a crook-in-waiting can sign up for an online course that features 20 lectures and five expert instructors, according to The Register, which reported on the school.
“Unfortunately, it’s a sign that criminals continually seek to lower barriers to entry, which then put more criminals into the ecosystem and cost card brands, retailers and consumers,” Rick Holland, Digital Shadows’ vice president of strategy, said in a written statement.
There’s A LOT On The Line for Retailer’s During The Holidays
Just how much is at stake? On average, retailers see 20 percent of their revenue during the holiday shopping season. Some sectors, such as jewelry, depend on holiday shoppers for 30 percent of their annual sales, the NRF says.
In all, last holiday season, consumers spent nearly $123 billion in “non-store spending,” which is largely e-commerce, the NRF reports.
No doubt fraudsters are in a growth industry. As online spending increases steadily, so to do the opportunities for online fraud. In fact, merchants are projected to lose $48.2 billion to fraud this year in the eight key industries covered by the Q1 2017 Global Fraud Index, published by PYMNT.com and Signifyd.
The Digital Shadows report talks about robust criminal enterprises engaged in online fraud. And, in fact, just as retailers are deep into their planning for the holiday shopping spike, fraudsters are scheming and testing the methods of their trade. Like any for-profit operation, fraudsters innovate and iterate even as fraud protection evolves.
In recent years, for instance, retailers have seen the rise of phony storefronts on digital marketplaces, such as those run by Amazon and eBay. Fraudsters set up decoy stores that offer good deals on products offered by legitimate retailers.
When an unsuspecting consumer orders a product, the fraudster captures that shopper’s credit card information and uses it to make his or her own purchases.
Eventually, of course, the innocent consumer realizes that the ordered product is never coming. At that point the legitimate retailer is hit by a chargeback and the consumer is left empty-handed.
Both experts know that artificial intelligence, such as machine learning, is a must-have today for those who want to manage the velocity and scale of orders the holiday season brings.
How Does Signifyd Help?
Signifyd leverages real-time machine learning and guarantees financial protection against fraud chargebacks for every order it approves. The powerful combination is a key reason O’Boyle and Ceccato have Signifyd success stories to tell.
O’Boyle says one of MSP Consulting’s clients saw fraud fall from between 3 to 4 percent of sales at its worst, to under tenths of a percentage point after it partnered with Signifyd.
Ceccato’s example is closer to home. Build.com, which was grappling with a fraud rate of 0.17 percent of sales before Signifyd, saw a precipitous drop after teaming with Signifyd. The retailer’s most recently reported monthly rate was 0.077.
Those numbers are a comfort, but there is one more advantage to Signifyd that shouldn’t be overlooked: Effective fraud protection leads to happy holidays — for everyone but the fraudsters.
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