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Study: Online retail fraud attacks on the rise

BY Dan Berthiaume

Attempts to defraud online retailers have increased for the second year in a row, with food and beverages and online electronics seeing the biggest increases.

That’s according to the 2019 Fraud Attack Index from e-commerce security company Forter. By analyzing merchant and transaction data, Forter determined the rate of increase in fraud attacks against online retailers in several different verticals during 2018, as compared to 2017.

A brief recap of results in several key verticals, as well as analysis of popular fraud mechanisms, follows.

Food and beverage
Attacks against online food and beverage businesses (including restaurants, delivery services and retailers in this industry) increased 79% in 2018, following a 60% increase in 2017. According to Forter, fraudsters often initially test stolen cards or e-wallets on lower-priced online food and beverage purchases before attempting higher-ticket purchases elsewhere.

Electronics
Fraud in the online electronics vertical skyrocketed 73% in 2018 over 2017. Electronics remain appealing to fraudsters given their value and the ease with which they can be resold. According to Forter analysis, customers are used to buying from third-party sites to get better deals, and fraudsters can market their stolen items as “refurbished” to explain a discounted price. Moreover, as good customers often buy multiple electronic items at once, fraudsters are more likely to get away with a good haul.

Apparel
Fraud attempts in the online apparel vertical rose 47% in 2018 from 2017, with easy resale of bulk items making apparel appealing to criminals. In addition, legitimate customers will frequently purchase apparel from third-party resale sites.

Fraudsters also use bots to purchase large volumes of limited edition apparel items, which they then resell for substantial markup.

Jewelry and luxury
The high value of jewelry and luxury items has always made them desirable for criminals. A 19% year-over-year increase in online attacks in this vertical during 2018 demonstrates its continued appeal for fraudsters.

The study also reviewed several common means of launching fraudulent attacks on online retailers. These include account takeover, when criminals gain unlawful access to an account to illegally make purchases or redeem loyalty points, which grew 45% in 2018 compared to 2017. Attacks by fraud rings, or online criminals banding together to collaboratively commit fraud, grew 26% year-over-year.

Policy abuse, which involves cheating retailers through use of coupons and discount codes, overusing refer-a-friend reward programs, or creating multiple accounts, sharply rose 170%. Returns abuse, however, dropped 90% due to tighter retailer restrictions.

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