Fraud is, unfortunately, a common fact of life in the digital age. Whilst the offense dates back way before the invention of the computer, as we continue to adopt more and more technology in our everyday lives, cybercrime becomes an increasingly serious threat to all of us.
Britain’s Office of National Statistics estimates that from March 2017 to March 2018, 3.24 million cyberattackswere carried out in the UK alone. Their aim? To defraud individuals or companies.
However, cyberfraud poses a particular threat to retailers because they can expose vulnerabilities in their data storage and security measures, and directly impact their bottom lines in several ways.
So, let’s take a quick glance at three of the most common types of fraud that retailers need to be aware of…
If you have seen the film Face/Off, starring Nicholas Cage and John Travolta, you know how serious the consequences of identity theft can be for the individuals involved. In reality, most cases do not end as dramatically as Face/Off does, with boats colliding and exploding or people getting shot with harpoon guns, but rather with innocent people losing their hard-earned cash to fraudsters.
For the past few years the number of reported cases of identity theft has only increased. Action Fraud, an initiative run by The City of London Police, revealed that between April and September 2018 almost £35m was stolen from victims.
That’s £190,000 a day.
Scammers can swipe identities in several ways. They could find personal information in people’s rubbish, hoodwink them into revealing personal data via phishing emails or hack their social media or retail accounts. Once they have the information, they can quickly wreak havoc by applying for loans, racking up enormous credit card bills and clearing out the individual’s bank accounts.
To reduce the risk of falling victim to identity theft, end users should take the standard precautions and ensure they have strong, unique passwords for all their accounts, be wary of what they share online and via social media and never follow links in unfamiliar or unexpected emails.
Financial service providers and retailers have a responsibility to protect their customers from such attacks as much as possible. This means investing in state-of-the-art security and fraud prevention measures, a worthwhile investment if companies are to avoid the awful press associated with data breaches.
Almost every adult in the UK is a member of at least one loyalty scheme. Most of these schemes follow the same blueprint – spend money with the company and you will accrue points. Once you have enough points, you can redeem them against more purchases with that company or ‘spend’ them on prizes like vouchers, days out or hotel stays.
The fact that you can spend points in this way means they have a monetary value, and if something has a monetary value, odds are that sooner or later it will become a target for thieves. Victims are targeted in much the same way as those who fall foul to identity thieves, via phishing scams, brute force attacks or via a breach in the database of the company that provides the loyalty scheme.
Often, loyalty scheme databases are not protected by the same level of security as those of banks or credit providers, so they could be a softer target for scammers. There is no justification for a retailer to allow their loyalty database to be breached as a result of scrimping on security, after all the main reason for setting up a loyalty scheme is to encourage customers to keep coming back. Why risk it becoming the reason they start leaving in droves?
Another common form of loyalty fraud is when an employee misuses their own loyalty account to earn points from purchases they didn’t make. One of the more widely reported cases involved anemployee at a large online retail store who managed to earn points on £280,000 worth of purchasesover a 2 years period by keeping receipts from customers that did not have a store loyalty card and adding them to her account. This is something that retailers should be mindful of when offering loyalty schemes to staff as well as customers.
This is perhaps the most disheartening form of fraud from a retailer’s perspective. You obviously can’t trust the shady characters lurking in the darkest corners of the deep web, you can’t always trust your own employees, but surely you can trust your customers, right?
Wrong. Friendly fraud (sometimes referred to as chargeback fraud) occurs when a customer makes a purchase online using a credit card, and then requests that their credit provider issue a chargeback for the full amount they paid once delivery is complete. They then happily hang on to the goods which they have effectively gotten for free.
To help combat this, retailers can limit the number of payment methods they accept and blacklist certain customers if they suspect they are committing friendly fraud. The blacklist option requires the ability to detect and react to fraud quickly, something that becomes both more challenging and more essential as a business grows.
At JT we make it our business to protect your business and our fraud protection services provide access to a unique data set, that acts in a complimentary way to enhance fraud prevention techniques.
Download our Fraud Protection Services (FPS) Overview to learn more about how JT's solutions can help you prevent fraudsters from targeting you.
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- Nao.org.uk. (2017). [online] Available at: https://www.nao.org.uk/wp-content/uploads/2017/06/Online-Fraud.pdf
- Ellis, K. (2019). Crime in England and Wales - Office for National Statistics. [online] Ons.gov.uk. Available at: https://www.ons.gov.uk/peoplepopulationandcommunity/crimeandjustice/bulletins/crimeinenglandandwales/yearendingseptember2018