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Consumers are adjusting to changes in their lifestyles as a result of the COVID-19 pandemic. The need to social distance and stay safe at home means that consumers are altering their buying habits and increasingly making online purchase. This rise in online activity is also leading to a rise in eCommerce fraud.

We spoke with Kount, which is built into BlueSnap’s All-in-One Payment Platform to offer our customers world-class online payment fraud prevention, to find out more about how we can prevent eCommerce fraud during these unusual times.

How does the current growth in online sales create opportunities for fraudsters?

The increase in digital purchases corresponds to an increase in fraudulent behaviors. From March 2020, when widespread attention to the pandemic began impacting economies, Kount collected data that tracks the industries seeing rises in digital eCommerce as well as fraud. Kount has developed a report that tracks eCommerce trends and fraud patterns.

We have identified 5 fraud trends that mirror the shift in retail digital purchases:

1. Resellers: Fraud has found a loophole: buy low and sell high using an eCommerce retailer’s supply chain. The outcomes can cause businesses to lose stock and disrupt any promotions retailers are using to build their business.

2. Retail Arbitrage: This is similar to reselling, yet more dangerous. Bad actors use sophisticated technology to automate the process of purchasing a product and then selling it for a higher profit. Although not illegal, retail arbitrage is a simple concept that involves an individual who finds a discounted product and then locates a niche where the product is in demand and sells it for higher than the paid-for amount. Simply put, it’s a process of flipping goods.

3. Cashing Out: This type of fraud occurs when bad actors buy goods or obtain cash using validated stolen payment cards or other user account data. For consumers, this can result in major loss. If debit card fraud occurs without their knowledge, any payments made out of the compromised bank account could lead to loss of money and hefty bank account overdraft fees until the fraud is discovered.

4. Friendly Fraud: Also known as first-party fraud, friendly fraud occurs when customers request refunds from their issuing banks, claiming that transactions on card statements are fraudulent. Rather than contacting the business where a purchase was made, a consumer simply calls their bank and, lacking verification information, the bank refunds the consumer and issues a chargeback to the business.

Friendly fraud can be accidental or intentional. Sometimes a consumer simply doesn’t recognize or remember a purchase, or their card was used by a family member without their knowledge. Made up of chargebacks and lost goods due to intentional and unintentional exploitation by real customers, friendly fraud can account for 40% to 80% of all fraud losses. As more consumers purchase essentials online, friendly fraud can significantly impact an online retailer’s revenue.

5. Account Takeover: Account takeover (ATO) fraud has emerged as an issue of major concern for online businesses and digital commerce. Part of the reason for the rise in this type of non-financial credentials fraud is for the number of stolen email addresses, passwords, and other personal privacy details, sold and distributed on the dark web. When a threat agent discovers the right combination of username and password, they can access and exploit genuine customer accounts.

Beyond exposing a victim’s personal identifier information (PII), a criminal can use unauthorized account access to inflict a host of related harms.

After taking over an account, a criminal can:

• Change the password and lock the real user out
• Drain an account of monetary funds or loyalty points
• Steal PII
• Buy goods, services, and gift cards
• Use the access to create other accounts
• Trade value between multiple accounts
• Illegally stream digital content

How can companies that accept digital payments protect themselves from eCommerce fraud?

Digital businesses should rely on fraud prevention solutions that scale with their rates of digital growth.

Relying on manual review alone is tedious, hard to scale, and prone to human error. To more efficiently and accurately scale eCommerce fraud detection and prevention, companies need to invest in a powerful fraud prevention solution. With Kount’s AI-driven online fraud prevention, businesses can prevent emerging fraud, accept more good orders, reduce manual reviews, and control business outcomes. Kount’s AI simulates an experienced fraud analyst by weighing the risk of fraud against the value of the customer, but on a faster and more scalable basis.

Kount’s AI-driven fraud prevention simultaneously helps good customers have a positive experience, essential for repeat business.

Where should eCommerce companies look to identify fraud?

Businesses should keep an eye on fraud throughout the customer journey. From a website visit to login, checkout or account creation, Kount’s Identity Trust Global Network analyzes billions of identifiers to establish real-time links between identity elements in order to return identity trust decisions that provide the desired customer experience ranging from low friction to blocking fraud.

The use of AI technologies to assess the risk of online transactions can help business automate and scale fraud mitigation to reduce operational costs and improve efficiency by avoiding false positives and reducing manual reviews.

As we now all work from home and shop online, what are some precautionary measures we can take as shoppers to help prevent eCommerce fraud?

Here are a few tips consumers can use to avoid becoming victimized by eCommerce fraud yourself:

  • Avoid reusing usernames and passwords and change passwords often. Multiple accounts with just a few passwords can lead to a situation where the weakest link can be breached, exposing a consumer to significant identity and fraud risk across all the accounts where those same credentials are used.
  • Monitor loyalty accounts to make sure an account takeover has not occurred. Avoid the loss of monetary value through loyalty points by keeping an eye on your accounts.
  • Monitor regularly. Check your account statements weekly and monitor your credit history to verify that all transactions have been authorized by you.
  • Be wary of email requests that ask you to click on suspicious links. Don’t reply to suspicious emails. And don’t give out your personal information via email or click on links if you are not completely sure who sent the email.
  • Support your family by helping them avoid elder abuse fraud. Elder abuse is a particularly damaging type of fraud/exploitation that hits close to home and impacts our families, neighbors and communities. Criminals steal $37 billion a year from America’s elderly. The favorite money transfer device of fraudsters? High dollar retail gift cards.

One of the best ways to protect yourself from eCommerce fraud is to be sure you’re using the right tools for your online business and payments. BlueSnap’s All-in-One Payment Platform has Kount’s award-winning powerful payment fraud protection strategy built in to reduce your risk and increase your sales even during uncertain times.

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