By Ed Whitehead, MD EMEA, Signifyd
As we found ourselves facing unprecedented challenges owing to the pandemic we were forced to overhaul our lives. Suddenly we had to learn how to do even more things solely online including working, socialising and shopping.
Many businesses were forced to innovate too – and quickly – to overcome some of the worst business continuity challenges ever seen. One of many industries that had to move online was retail and there was a 32.4% increase in newcomers to ecommerce in 2020 compared to 2019. They spent 163% more online than the cohort of newcomers that shopped online in 2019, so retail couldn’t afford to miss out on revenue like that.
However, frustratingly for retailers and consumers alike, another group of people that were getting creative were criminals. Never ones to miss an opportunity, they were seeking ways of using the chaos of COVID-19 — including the shift to shopping online and working from home — to their advantage.
Such behaviour has presented challenges for retailers. While consumers wanted to benefit from contactless payments, click-and-collect, inpost locker collection, and other new ways of shopping online they became some of the biggest targets for fraud.
The ways in which fraudsters have innovated and diversified
The switch to working from home was one thing that paved the way for fraudsters to innovate, and there was a significant rise in ‘mule fraud’ – whereby fraudulently purchased goods are transported under the guise of a legitimate company. Even very early on in the pandemic, Signifyd was identifying between five and eight potential mule-fraud attempts per day.
One example of mule fraud was when, in 2020, a company called Jerry & Sam Logistics shared a job advert on social media for a new employee to help ship packages on time. The role paid $2,800 a month plus bonuses and remote-working which is an offer that will have appealed to many – particularly if they had lost their job and were looking for a way to work from home.
However, unbeknownst to the applicants was that they would in fact be shipping fraudulently purchased high-value goods such as drones, cameras, gold, and kitchen appliances. Jerry & Sam Logistics was actually a front company for a criminal ring that decided to capitalise on the work-from-home switch.
But mule fraud is only one type of fraud that suddenly flourished during the pandemic and scams which fraud rings had typically only used occasionally – such as synthetic identities, return fraud and fraudulent fulfilment disputes – grew in scope. Fraudsters have particularly focused on the early stage of the online purchase journey by finding malevolent ways to appropriate existing accounts and create new false accounts.
Fraud has also become more abundant, more automated and more diversified in terms of techniques and targets, resulting in a terrible bout of issues for a retailer trying to protect their business and their customers.
How retailers can ensure they stay one step ahead
Just as there are ways for fraudsters to innovate, there are ways to resist them. For example, let’s take click-and-collect which more than 47% of UK consumers surveyed by Signifyd said they will be more likely to use in the future.This indicates that it’s here to stay, but it’s also vulnerable to fraud.
This is because orders must be ready for collection when customers arrive for them , so there isn’t time for manual order reviews, nor do such digital orders arrive online with a delivery address, which is a key signal that can help to qualify the validity of the order.
There is a relatively new breed of commerce protection that relies on vast networks to gain an insight into the identity and intent behind each order, based on patterns and outcomes seen on the vast networks, which is being increasingly adopted by forward-thinking retailers.
Such solutions, which automate fraud protection and payments optimisation, give retailers benefits beyond just click-and-collect, increased conversions and decreased chargebacks; they provide instant ‘ship-or-don’t-ship’ decisions and can even help retailers automate the requirements of new regulations such as strong customer authentication (SCA).
SCA is the new payments regulation which, after many delays, will come into force in the UK on 14th March. However, it won’t be a silver bullet for fraud and criminals are already finding ways to outsmart it so retailers will need to consider additional solutions.
And while it may seem as though fraudsters gained the upper hand during the pandemic, retailers don’t have to accept this as the new norm. By adopting automated solutions that learn and react to changing threats and conditions retailers can defend themselves against the new and ever-changing forms of fraud.