Top takeaways from MRC Vegas 2023

Sift was excited to exhibit and present at MRC Vegas 2023, the leading conference for payments and fraud prevention industry professionals to meet and share ideas.

During the conference, Brittany Allen, Trust and Safety Architect at Sift, co-led a Fraud 201 session and presented on How Marketplaces Combat Collusion Fraud. During the 3-hour Fraud 201 workshop, Allen covered tactics for identifying fraudsters, managing a fraud department, and tracking emerging fraud trends.

Sift’s team of Trust and Safety Architects also had the chance to attend a diverse range of sessions and learn from other industry experts about what fraud challenges and trends they’re facing this year. Read the team’s top insights below.

Key fraud management challenges in 2023

It’s been a challenging year for many businesses, and that’s come with unique fraud obstacles. MRC’s latest Global Payments and Fraud Report found some of the top challenges merchants faced in the past year were: using data effectively to manage fraud, identifying and responding to emerging fraud attacks, and keeping up-to-date on rule changes by payment/card networks. Today, merchants are increasingly focused on reducing fraud management costs—without racking up losses and forcing undue friction upon their customers.

With merchants using an average of five fraud prevention tools and every dollar lost to fraud costing merchants $3.75, it’s clear that fraud is a massive operational cost when not managed properly. Merchants not only need reliable ways to proactively prevent fraud, but also operational efficiencies that make it easy to scale and speed up case review. For example, Sift’s easy-to-use Console, end-to-end automation, and app connectivity help risk teams stay productive with network visualization and bulk decisions. 

Top fraud trends to monitor this year

Marketplace collusion fraud

Sift Trust and Safety Architect Brittany Allen presented on how marketplaces can combat collusion fraud, one of the most challenging forms of abuse. Two-sided marketplaces are prone to collusion fraud, which is when a buyer and seller are the same and use the marketplace to extract value through stolen payments, making it an extremely costly form of fraud. Some of the most prevalent types of collusion fraud impacting marketplaces are account takeovers, buy now, pay later (BNPL) fraud, “item not received” disputes, and voucher/promo cashouts. Marketplaces should leverage internal data, real-time machine learning, and partnerships with fraud experts to accurately prevent these forms of fraud and optimize their team’s fraud prevention processes. 

Account takeovers 

Account takeovers (ATOs) are becoming a bigger concern for many merchants recently. The Identity Theft Resource Center’s 2022 Annual Data Breach Report found 422.1 million people in the United States had their credentials exposed in data breaches in 2022, an increase of almost 41.5% from 2021. Having the technology in place to detect suspicious logins is crucial, and so is consumer education. Especially in cases of social engineering, it can be difficult to detect and defend against, as it blurs the line between 1st and 3rd party fraud. Businesses that have proactive communication with customers and processes in place to detect suspicious logins through various signals are much more well-equipped to handle attempted takeovers. Discover more tips for balancing ATO risk in our recent webinar.

First-party fraud

The MRC found 34% of merchants have experienced first-party fraud (friendly fraud), costing an estimated $35 for every $100 in disputes. And over half (62%) of merchants reported an increase in friendly fraud since 2021. These figures are in line with Sift’s recent consumer survey results, finding 23% of consumer respondents who have disputed a purchase have filed a chargeback in the last year using fraud as the reason for doing so, even though they received the item and were satisfied with the purchase. See more data in Sift’s latest report on disputes, which examines how rising disputes are impacting revenue and brand loyalty.

Fraud in LATAM 

Latin America (LATAM) has one of the highest fraud rates globally, with one in five transactions being declined due to fraud in the region. Businesses operating in LATAM commonly face card testing, phishing/farming, and identity theft, in addition to an influx of alternative payment fraud.

As regulators are starting to take action against fraud in this region, there are possibilities for  strong customer authentication (SCA) and a more robust know your customer (KYC) process.

To safely and securely operate in this region, businesses need solutions that offer flexibility and the ability to manage unique fraud patterns for specific regional considerations. Merchants need a layered approach, including the use of smart logic to pinpoint data inconsistencies when deciding what to send to 3D Secure (3DS), for example making 3DS mandatory for debit transactions, or outright blocking high fraud transactions.

How to get more out of your fraud prevention solution

In this rapidly-evolving landscape, it’s more important than ever to invest in data science to fight fraud. When fraudsters are constantly searching for weaknesses in the customer journey, businesses need a global data network to detect fraud signals in one corner of the market and block them from impacting others. As Gartner® states in its 2022 Market Guide for Online Fraud Detection: “The ability to share threat intelligence about confirmed fraud cases across a vendor’s entire ecosystem is something that all OFD platforms should have.”* Sift’s global data network, for example, ingests more than one trillion events per year across 34k+ sites and apps worldwide. This means our machine learning model picks up fraudulent activity and blocks it from impacting other customers in the network in real-time.

Learn more about how fraud is connected across industries in our Fraud Intelligence Center. 

*Gartner, Market Guide for Online Fraud Detection, Akif Khan, Dan Ayoub, 12 December 2022