Sift Logo Several blue dots forming a sphere to the left of the word Sift in italic font.
  • Products

    Digital Trust & Safety Suite

    Fight fraud without sacrificing growth

    Learn more →

    Passwordless
    Authentication

    Account
    Defense

    Content
    Integrity

    Payment
    Protection

    Dispute
    Management

    Sift
    Connect

    PSD2
    Solution

    New Releases & Enhancements

  • Partners

    Sift Partner
    Program

    Join the leader in Digital Trust & Safety

    Learn more →

    Commerce platform partners


  • Industries

    One solution, many applications

    Learn how Sift can work for your industry

    Learn more →

    Featured industries


    Fintech

    Retail

    Food & Beverage

  • Customers

    See case studies by industry

    Sift works across every use case and region

    Learn more →

    Featured customers


  • Resources

    Explore our resources

    Access trends, guides, and insights from Sift

    Learn more →

    Blog

    Ebooks

    One Pagers

    Demos

    Videos

    Webinars

    Infographics

    Podcasts

    Trust & Safety University

  • Fraud Center
  • Company

    Why leaders choose Sift

    Technology, community, and partnership

    Learn more →

    Our mission: Help everyone trust the internet


    About

    Careers

    News & Press

Request a demo
Products
  • Digital Trust & Safety Suite
  • Passwordless Authentication
  • Account Defense
  • Content Integrity
  • Payment Protection
  • Dispute Management
  • Sift Connect
  • PSD2 Solution
  • New Releases & Enchancements
Why Sift
  • Salesforce
  • Magento
  • Shopify
Industries
  • Fintech
  • Retail
  • Food & Beverage
Customers
Resources
  • Blog
  • Ebooks
  • One Pagers
  • Demos
  • Videos
  • Webinars
  • Infographics
  • Podcasts
  • Trust and Safety University
Fraud Center
About
  • Search Careers
  • Our Company
  • Contact Us
  • Engineering Blog
Request a DemoSign In
  • Blog Home
  • Insights
  • Payment Fraud
< prev / next >
Share this article on LinkedIn
Tweet this article
Share this article on Facebook
SOCIALICON
Share this article via email

Navigating the Evolving Alternative Payments Ecosystem

By Kathryn Schneider  / 

27 May 2021

Consumers are increasingly choosing alternative payment sources when purchasing goods and services—and fraudsters are finding ways to exploit these methods undetected. Although traditional credit card transactions still reign supreme, the increasing adoption of alternative payments, including cryptocurrency, digital wallets, mobile payments, gift cards, and store credits, is creating opportunities for various vectors of attack. As more consumers switch over to these alternative payments, businesses will need to reevaluate their fraud prevention strategies to keep up with the evolving payments ecosystem.

To dive deeper into this developing landscape and understand what merchants are up against and how they can prepare, Sift had the pleasure of participating in Merchant Fraud Journal’s recent webinar, Digital Trust & Safety: Combatting the Evolving Complexities of Payment Fraud. During the live event, Bradley Chalupski, Editor-in-Chief at Merchant Fraud Journal moderated the panel with Jane Lee, Trust and Safety Architect at Sift, and fraudster-turned-fraud-prevention-consultant and founder of Dispute Defense Consulting, Alexander Hall.

“With all of these alternative payment methods that are increasingly used and increasingly important to consumers, fraudsters are going to find the loopholes and find the ways to exploit these new methods that we as a fraud prevention community are not currently prepared for,” says Chalupski.

Chalupski explains how it’s always harder to play defense than it is to play offense, with fraudsters constantly trying new moves to skirt around merchants and fraud prevention methods. But from what his publication is hearing after talking with businesses, this problem is not being addressed enough.

Businesses are unequipped to handle alternative payment fraud

Merchant Fraud Journal recently published data from a survey conducted of its readership. The independent publication asked fraud prevention leaders at some of the world’s leading brands how they currently evaluate the risk of the changing payments landscape. The results shine light on how companies are approaching the current situation and some of the blind spots they have in their future plans.

The publication asked fraud leaders about their current plans for alternative payments adoption, reporting that more than 25% of fraud prevention leaders plan to expand the number of payment methods they accept over the next two years, with only 6% saying they would definitely not expand to additional methods. Fraud leaders know they must start to prepare for a world where equal emphasis is placed on non-traditional vectors of attack, but many are unprepared to manage the growing threat at present.

Do you plan to expand the number of payment methods you accept in the next 12-24 months? 26% yes, 6.7% no, 66% unsure.

When asked about their ability to handle e-commerce fraud from sources other than credit cards, merchants largely expressed a lack of effectiveness within their fraud prevention efforts, with only 26% of leaders reporting their tactics as being “very effective.”

How effective are you at preventing ecommerce fraud from sources other than credit cards? 26% very effective, 67% mostly/slightly effective, 7% not effective at all.

Surprisingly, despite the combination of increasing threats and unpreparedness to handle them effectively, 86% of e-commerce fraud leaders invested the most in preventing credit card fraud, with 0% focusing the most on store credit cards, crypto, or checks. 

Which type of ecommerce fraud do you invest the most in preventing? 86% credit cards, 6.7% gift cards, 6.7% in-app purchases, 0% store credit cards, 0% crypto, 0% checks/

This data shows that fraud leaders continue to under-invest in preventing fraud from alternative payment sources that are increasingly being adopted. In fact, these sources are shown to only continue to grow in popularity in the future and account for a larger percentage of fraud attacks merchants will need to combat.

“The generally accepted concept behind fraud is that it’s all centered around stolen credit cards that are exchanged on the dark web. And granted, yes, there’s a high volume of that. I’m here to shed light on the fact that I would say 80% of the methods that I participated in had nothing to do with stolen credit cards,” says Hall.

Hall goes on to explain that there are many methods to commit fraud other than using credit cards, citing how valuable checks can be to fraudsters. “The difference between a simple piece of paper and a check is a MICR (Magnetic Ink Character Recognition) line. That’s a $40 purchase,” says Hall.

Uncovering the new Fraud Economy ecosystem

Fraud vectors have evolved from siloed incidents to a much larger, interconnected network of fraud known as the Fraud Economy, with the majority of abuse vectors serving as means to an eventual payout. There are hundreds of vectors within account takeover, content abuse, and payment fraud that fraudsters can leverage to exploit merchant systems, and they’re all intertwined.

The Fraud Economy: account takeover, payment fraud, content abuse.

Historically, the fraud prevention industry has been laser-focused on tackling the issue of chargebacks, but it’s important for merchants to break out of that narrow mindset and see fraud for the broader ecosystem of which it’s a part. The reality is that e-commerce fraud goes way beyond credit card fraud, and the sooner that businesses come to terms with this evolving landscape, the better prepared they can be to fight it. 

Lee coined the term “one-dimensional fraud” to talk about these one-to-one approaches to catching fraud: “One-dimensional fraud is easy to catch. It’s easy to detect whether a credit card was stolen. You get that response back relatively quickly from your payments processor. But now, when an account is taken over to use a stored payment method, that now becomes a little trickier to catch.”

How to stay ahead of payment fraud

To help businesses struggling with how to tackle such a mountain of a problem, Hall has developed a four-step process for combatting various fraud vectors: identify, monitor, automate, and repeat. It’s first crucial to identify all your transfers of value, not limited to just credit cards, that your business processes. Next, monitor and take note of fraudulent characteristics such as shipping addresses, billing addresses, and IP addresses that may have been used multiple times at large volumes. This will give you an indication of how prevalent your fraud problem is and how these fraudsters are infiltrating your system. In order to manage high abuse volumes, it’s essential to turn to more efficient modes of automation, such as a fraud prevention vendor. 

By turning to a fraud prevention service, like Sift, you can cut down on time-consuming manual review processes and tap into a robust network of data sources to help catch these fraud vectors. The Sift Digital Trust & Safety Suite uses patented, real-time machine learning to detect various types of abuse, enabling merchants to refine, scale, and streamline operations. Sift also leverages a global merchant data network to identify fraud trends so that even small merchants benefit from shared flagged information and accounts, allowing more businesses to detect and stop fraud before it happens.

Watch the webinar to get more insights on alternative payments and tips on how you can protect and grow your business with Digital Trust & Safety.

Related

alternative paymentscryptocurrencydigital fraudDigital Trust & Safetyfraud datafraud economyfraud preventionfraud solutionsMerchant Fraud Journalpayment abusepayment fraudpaymentstrust and safetytrust and safety experts

Kathryn Schneider

Kathryn Schneider is Sift’s Content Marketing Manager, specializing in digital content that sparks lasting impact. She’s an avid hiker, art enthusiast, and dedicated nonprofit volunteer.

  • < prev
  • Blog Home
  • next >
Company
  • About Us
  • Careers
  • Contact Us
  • News & Press
  • Partner with us
  • Blog
Support
  • Help Center
  • Contact Support
  • System Status
  • Trust & Safety University
  • Fraud Management
Developers
  • Overview
  • APIs
  • Client Libraries
  • Integration Guides
  • Tutorials
  • Engineering Blog
Social

Don't miss a thing

Our newsletter delivers industry trends, insights, and more.

You're on the list.

You can unsubscribe at any time. Please see our Website Privacy Notice.

If you are using a screen reader and are having problems using this website, please email support@sift.com for assistance.

© 2022 Sift All Rights Reserved Privacy & Terms

Your information will be used to contact you about our service and subscribe you to our direct marketing communications. You can, of course, unsubscribe at any time. Please see our Website Privacy Notice.