[Report] Outsmarting payment fraud in the age of automation
By Jane Lee /
22 Mar 2022
Cybercriminals operating in the Fraud Economy are leveraging increasingly sophisticated methods of automation to commit payment fraud at an astounding scale. These cutting-edge attacks have the potential to hold businesses back from reaching their full potential.
In our latest Digital Trust & Safety Index, we dig into why online payment fraud rose in 2021 and how it’s impacting business growth across various industries, particularly fintech. The data and findings in this report are derived from our global merchant network of over 34,000 sites and apps, along with survey results from more than 1,000 consumers, on where they’ve experienced payment fraud and how it influences their buying behavior and their choice in brands.
Automated payment abuse takes a toll
Fraudsters have recently evolved the tactics they employ in the Fraud Economy to maximize profits, turning to automation to commit account takeover, multi-level scams, and financial fraud at scale across widespread merchants and verticals. The increased complexity of fraud and bot-based attacks drove attempted payment fraud up 23% across the Sift network from 2020-2021.
Customers are also experiencing how pervasive payment fraud has become. Nearly half of respondents (49%) surveyed by Sift report that they’ve fallen victim to payment abuse over the past one to three years—and 41% in the past year alone. After looking at payment fraud rates and consumer experiences year-over-year, the pattern is clear. Without a proactive approach that’s capable of identifying and stopping fraud before the damage has been done, fraud will continue to advance and become more difficult for businesses to manage.
Fintech gets pummeled by payment fraud
From 2020 to 2021, we saw fraudsters doubling down on fintech, looking to tap into the skyrocketing 121% growth in fintech transaction volumes reported across the Sift network. Based on our findings, we’ve identified patterns in fraud behavior, with cybercriminals increasingly targeting emerging and expanding industries, such as decentralized finances and alternative payments.
Across all financial services, payment fraud attack rates ballooned 70%—the highest 2020-2021 increase of all parent verticals in the Sift global network. Drilling down a level deeper, you can see in the image below that digital wallets faced a gutting 200% surge in payment fraud attacks, followed by PSPs at 169% and crypto exchanges at 140%.
It’s clear these inflations in fraud have a direct impact on business operations and growth—but they’re also affecting consumers’ interactions with these merchants, and subsequently, their loyalty towards them. One-third of surveyed payment fraud victims (33%) reported financial services sites as being the highest risk. People likely feel most at risk when using these sites not because they’re inherently insecure, but because their life savings could be at stake. And in the event a consumer does see an unauthorized transaction on their bank statement, they will always associate the brand with fraud, likely costing that merchant the customer’s business.
How to get ahead of payment fraud
Cybercriminals often leverage multiple types of abuse to commit payment fraud, and they look for weak points in individual victims and business operations to get a foot in the door and launch wider attacks against communities of merchants and consumers.
Ultimately, it’s up to trust and safety teams to protect their customers and their business. And because the Fraud Economy is global and interconnected, attacks against one merchant can cause a ripple effect, impacting many other merchants across other industries. For example, a data breach or a user’s poor password hygiene can lead to stolen credentials being used to infiltrate accounts across multiple other sites used by that individual. Our new Fraud Intelligence Center investigates just this—with fraud data and trends that help merchant risk teams learn how cybercriminals leverage the Fraud Economy to target businesses and consumers around the globe.
In order to combat these attacks and prioritize growth, businesses need a Digital Trust & Safety strategy that focuses on proactively eliminating opportunities for attack while optimizing for the best consumer experience. An end-to-end, flexible approach, backed by a network of billions of fraud signals, helps businesses streamline fraud operations and maximize revenue potential.
Download the Q1 2022 Digital Trust & Safety Index to discover more insights.
Jane Lee is a Trust and Safety Architect at Sift, who specializes in malicious websites, spam, misinformation, account/content abuse, chargebacks, and payments risk. Prior to joining Sift, she was on teams at Facebook and Square, and also spent some time as a Private Investigator. She is passionate about designing and operationalizing systems for detection and enforcement of fraud at scale.