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By Kathryn Schneider /
The retail industry has steadily evolved towards an omnichannel model over the past decade, with the pandemic-era shift in consumer spending habits pressuring retailers into digitizing on a frantically accelerated timeline. For many, this has opened up great opportunities for growth. But with great opportunity comes great vulnerability.
Cybercriminals have adapted to this dynamic landscape, scavenging for new ways to exploit the expansion of omnichannel retail for their own benefitâand succeeding. Recent data from Sift shows a 69% increase in the average value of attempted fraudulent purchases in 2020.
During a recent webinar hosted by Sift and Retail Dive, Karisse Hendrick, Owner/CEO of Chargelytics Consulting and Kevin Lee, Trust and Safety Architect at Sift, discuss this ânew normalâ of omnichannel retail digitization and bring light to five emerging threats within the industry.
Following the initial pandemic shutdowns and social distancing measures, many omnichannel retailers turned to buy-online-pickup-in-store (BOPIS) and curbside pickup to retain business and offer customers more flexibility. But this rushed expansion left retailersâparticularly smaller businesses without fraud-prevention methods in placeâsusceptible to cybercriminals looking for flaws in the system.
These âcard not presentâ channels are more prone to abuse because fraudsters can pick up illegitimate orders without needing to verify their payment information, or in some cases, prove their identity. So retailers are faced with a challenge: protect customer ease of shopping and risk losing revenue to fraud, or add friction to the shopping experience and risk losing customersâ business. Lee offers a wise saying as advice to any omnichannel retailer struggling with this balance:
âTrust is earned in drops and dropped in buckets.â
Hendrick also succinctly describes this struggle as a âbalancing beamâ on which retailers are constantly having to weigh the customer experience along with the risks.
As new omnichannel retail processes are put into place, fraudsters love to find loopholes. With the vast majority of consumers using the same password for multiple accounts, itâs easier for them to do even more damage. Automation only adds to the problemâone bad actor can scale targeted, more profitable attacks using a whole slew of tools. Between March and August 2020 alone, account takeover (ATO) attacks increased by a staggering 378%.
Account takeover not only leads to financial losses, but also brand damage and tainted consumer trust. In fact, nearly one-third of customers say they would stop buying from a retailer if their account was compromised on their site.
When it comes to adapting in the face of mass economic disruption, Lee provides some compelling thoughts: âOne of the pieces of advice that Iâve been given that I think of quite a bit is the term âevolve or dinosaurâ where businesses must continue to adapt to what their end consumers really want, or theyâll become irrelevant.â
While most big-box retailers have extensive security measures in place, smaller retailers donât always have the infrastructure to combat fraud as effectively, resulting in a loss of consumer trust in the event their accounts are compromised. This is where fraud prevention software comes inâthe Sift Digital Trust & Safety Suite dynamically scales to unique and diverse business needs, helping to fight fraud and improve the customer experience.
As retailers rush to digitize, theyâre quick to discover the benefitsâand risksâof rapid innovation. This is precisely why experts flag digital transformation as a âdouble-edged sword.â While it does offer flexibility to retailers and consumers, it can also open up new possibilities for attack.
Because itâs relatively easy to cancel a compromised credit card and stop fraudsters in their tracks, illegitimate actors have had to get more creative with their tactics. Fraudsters have evolved past the standard credit card fraud and are now targeting credentials and user information to infiltrate new technologies, apps, and even loyalty programs, including credit card points, airline miles, and hotel rewards.
To cybercriminals, gift cards are as good as cash due to their anonymity. So as online gift cards surged in popularity during the pandemic, fraudsters were ready to take advantage of the opportunity. In just the third quarter of 2020 alone, consumers lost nearly $80 million in gift card scams, according to the Federal Trade Commission.
Due to this rise in gift card fraud, many companies have defaulted to frictionâtreating any questionable transaction as grounds to shut down an order. But this friction can cause legitimate customers to have their transactions unfairly canceled, impacting their trust and loyalty in the business.
Hendrick emphasizes why itâs so crucial to not only combat fraud, but prioritize enabling legitimate customers: âA lot of times when youâre canceling a good order, youâre not just canceling that specific order, but youâre essentially encouraging your customer to go shop with your competitor because they werenât able to have a successful transaction.â
Credit card fraud has been pervasive for decades, and itâs only picking up speed thanks to technology and automation. Itâs now the fastest-growing form of identity theft, increasing by more than 104% between Q1 2019 and Q1 2020.
Lee explains that cybercriminals utilize scripts to automatically cycle through and test thousands of accounts and usernames at an inhuman speed. Theyâve also deployed machine learning to mimic legitimate behavior by taking over valid accounts and even creating synthetic identities to create accounts that appear credible to the naked eye.
Shockingly, credit card numbers are easily accessible on public platforms like Reddit, Facebook, and Telegram. Fraudsters no longer have to go to the dark web to get into the game of credit card fraud, making it all the more pervasive and uncontainable.
Watch the full webinar to get even more insights from trust and safety experts Kevin Lee and Karisse Hendrick.
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.