Pandemic E-Commerce Promises to Bring More Online Fraud

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Pandemic E-Commerce Promises to Bring More Online Fraud

By Thad Rueter - 10/02/2020
Pandemic E-Commerce Promises to Bring More Online Fraud
The report found that Buy Online Pickup In Store (BOPIS) fraud attacks have increased by 55%.

All rewards bring problems.

For the ongoing spike in e-commerce during the pandemic, the problem is the increasing risk of fraud, at least according to a new report from Forter, which sells fraud-prevention software.

The findings might come across as a mere sales pitch. Even so, online criminals are always crafting their tactics as consumer and retail patterns shift, and those criminals increasing work as part of well-organized and technically savvy global operations. As well, the pressing needs of the pandemic has likely lessened the focus on online security for many retailers.

The closing of many brick-and-mortar retail stores during the pandemic has led to more consumers shopping online, including people who rarely used e-commerce. Forter’s newly released research, in fact, found that new users now account for 30% of transactions.

That, in turn, has created challenges for retailers — challenges that will likely get worse during the upcoming holiday shopping season.

As Forter put it, “while new users create business opportunities, merchant systems are also likely to be overburdened with new accounts and they risk their manual review teams or legacy fraud prevention systems falsely declining these accounts – due to lack of information – resulting in lost revenue and negative impacts to their brand reputation.”

False indications of fraud are not all that retailers have to worry about during the fourth quarter.

“Growing consumer transaction volumes have masked fraud and abuse attacks and vulnerabilities,” the report states. “Fraud and abuse remain persistent issues that merchants must prioritize.” That said, fraud is not necessarily increasing percentage-wise in all areas of retail, Forter said, though the sheer numbers might remain high, given the growing volume of e-commerce transactions since spring.

Merchants during the pandemic have turned to such services as buy online, pickup in store, and curbside delivery, to keep consumers satisfied while taking precautions against the spread of the virus. Some merchants also have loosened return policies. But for every good intention there is someone out there eager to exploit it. The Forter report found that “while these (services) improve overall customer satisfaction, they also create new vulnerabilities for both legitimate customers to abuse and fraudsters to exploit.”

More specifically, the report found that Buy Online Pickup In Store (BOPIS) fraud attacks have increased by 55%.

Retailers already have enough on their plates dealing with store closures and changes in consumer spending. But Forter says that the fraud opportunities being created now by pandemic-related shifts will be exploited well into the next year and probably beyond.

“COVID-19 has served as a catalyst for nearly all merchants to optimize their digital channels and has pushed focus from security, to instead, business solvency,” according to the report. “As such, with diminished security precautions in place, and focus diverted elsewhere, fraudsters have used this time to breach accounts and harvest data. Online criminals are accruing this data and aging accounts now to launch account takeover attacks and other account-based attacks and abuse in the coming months.”

Retailers are, in fact, taking steps to reduce the risk of fraud and related crimes that take a bit out of revenue. In late September, for instance, The Buy Safe America Coalition, a group of retailers, consumer groups and manufacturers backing efforts to combat organized retail crime and protect consumers and communities from counterfeit and stolen goods, welcomed new members CVS Health, Ulta Beauty and Walgreens, along with Dutch multinational conglomerate Philips and the National Association of Chain Drug Stores.

Sales of fraudulent beauty and personal care products, for example, have long been a problem on online marketplaces, but the problem has become worse recently, with more Americans shopping by computer. According to brand protection experts, counterfeit beauty and personal care products sold online have soared 56% in 2020 alone.