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By Kathryn Schneider /
There’s no denying the pandemic played a pivotal role in e-commerce in 2020. The relentless disruption was felt across nearly every vertical, making it easier for fraudsters to slip through the hands of trust and safety teams stretched thin by surging online traffic and unpredictable consumer spending patterns. Fraudsters have thus become experts at slinking around security measures, evolving from siloed payment fraud attacks to a full-blown Fraud Economy—a complex, synchronized, and interconnected network of cybercriminals looking to make a dishonest profit.
To better understand how fraudsters out-maneuver merchants in the Fraud Economy, our Trust and Safety Architects dive into new online data each quarter, uncovering fraud trends and delivering expert insights. The findings in our latest Digital Trust & Safety Index are derived from Sift’s global network of customers, representing over 34,000 sites and apps using Sift, and focus on the dynamic state and rising impact of payment fraud.
E-commerce carts overflowed in 2020, with internet traffic surging 50%-70% and the amount of money spent by online shoppers nearly doubling. This may have been a welcome sight to merchants weary about how the pandemic would impact their business, but the jump in online spending left many unprepared for the subsequent rise in cybercrime. The average value of fraudulent purchases increased by 69% year-over-year, and a whopping more than 1 trillion was lost globally to online fraud last year alone.
You’d be hard pressed to find an industry not impacted by the pandemic, but certain sectors fared far worse than others. Attempted fraud ballooned across Sift’s data network, driving year-over-year fraud rates wildly high in some industries. Loyalty merchants, which help businesses engage their customers, saw fraud rates jump by 275% as compared to 2019.
The above illustration details the four types of businesses hit hardest by the mushrooming Fraud Economy: lodging merchants, omnichannel retailers, digital wallets, and professional marketplace companies each saw fraud rates and fraudulent order values rise significantly between 2019 and 2020—a problem compounded by pandemic-era market fluctuations.
Sift’s Trust and Safety Architects credit these higher-value attacks and ballooning fraud rates to the challenges e-commerce businesses faced under coronavirus restrictions: too many people cooped up at home, misinformation causing changes in consumer behavior, dormant user accounts, and fraudsters watching from the wings, ready to swoop in.
With online activity and spending exploding in 2020, opportunistic cybercriminals lurked behind traffic and transaction surges on popular sites. But these fraudsters were no match for Sift’s Data Science team. Our experts identified a money-laundering fraud ring, dubbed Cart Crasher by Sift, which targeted donation sites during a time of global turmoil and need, taking advantage of the 20.7% increase in online giving last year. Using stolen credit cards, fabricated accounts, and automated scripts, they repeatedly funneled small amounts of money using guest checkout, “donating” funds to their own fake causes.
These fraudsters relied on bots, scripts, and malicious software to accelerate card testing and credential stuffing, automating their tactics to unleash bigger, faster, and more valuable online fraud attacks. If you’re interested in learning more about Cart Crasher, check out our report to see how the scheme unfolded.
Fraudsters have attested that they are capable of, and eager to, go to great lengths to turn a profit on merchants’ dime. But by harnessing insights compiled by our data science experts, merchant teams can gain more insight on who they’re up against and how they can stay ahead.
With our Digital Trust & Safety Suite, online businesses can quickly implement scalable fraud prevention strategies that don’t limit growth for the sake of protection. We use patented, real-time machine learning and over 70B events per month from our merchant data network to proactively detect payment fraud spawning from the Fraud Economy, enabling merchants to refine, scale, and streamline their trust and safety operations.
Download the full report to explore these findings and discover more insights to protect your business and help it flourish.
Kathryn Schneider is a Senior Content Marketing Manager at Sift. She specializing in creating engaging digital content that helps businesses solve key pain points.
Stop fraud, break down data silos, and lower friction with Sift.