Omnichannel retailers saw a 50% spike in fraud across their digital networks in 2020 compared to 2019, according to data compiled by security solutions firm Sift. Those same retailers saw the average value of fraudulent orders increase 9.09% year-over-year as the shift to online buying during the COVID-19 pandemic opened new doors for cybercriminals.
“The pandemic played an influential role in how payment fraud changed and scaled in 2020,” the new report from Sift noted. “Incidentally, the relentless disruption felt across e-commerce also exposed the depth of the Fraud Economy, and the danger it poses for businesses.”
The security firm noted that cybercriminals have formed sophisticated networks to exploit online businesses, and they operate on the same basic principles as the industries they attack.
“As a result, fraudsters are as knowledgeable about the mechanics of digital commerce as the legitimate merchants they target. They can accurately identify security vulnerabilities and know how to use a merchant’s success against them,” the report said.
Internet traffic was up between 50% and 70% last year, Sift said, and the amount of money spent online nearly doubled. The result was a 69% increase in the average value of attempted fraudulent purchases across all industries.
The report, “Exposing the Multi-billion Dollar Fraud Economy,” pulled Sift data from over 34,000 sites and apps using Sift’s services. Sift estimates more than $1 trillion was lost globally in 2020 due to cybercrime, with ransomware attacks rising 40% and email-delivered malware attacks climbing about 600% from 2019.
Transportation was the top vertical targeted, with an 8.4% increase in attempts in 2020 compared to 2019. Crypto exchanges (4.6%) and gaming/gambling (3.7%) were next in line. Loyalty businesses, which help businesses engage their customers, was the top targeted industry with a 275% increase in fraud attempts. Gaming/gambling saw the largest average value increase, up 116.67%, followed by commerce marketplaces at 61.34% and on-demand services at 58.67%.
“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 take advantage,” the report said.
Sift noted that cybercrimes thrive at times of increased digital engagement because companies can quickly become overwhelmed with servicing their customers’ needs, leaving less time to prepare for potential fraud. In 2020, that is exactly what happened, particularly online donations sites that saw a 20.7% increase in pandemic-related giving.
“Using stolen credit cards, fake accounts, and automated scripts to do the dirty work, this fraud ring repeatedly funneled small amounts of money to themselves by setting up fake causes on various giving sites in order to request donations,” the report said. “After creating a separate recipient account to link to those funds, the fraudsters involved would use guest checkout — entering fabricated emails or usernames as verification — and stolen payment information to ‘donate’ small increments of money to their own fake causes (typically around $5).”
E-commerce-related payment fraud also spiked in 2020, especially on mobile devices. Sift said that 45% of the U.S. e-commerce market was conducted on mobile devices last year, and 62% of all payment fraud took place on a mobile device — an 11% increase over 2019.
Theft involving food and alcohol transactions ranked just fourth on the overall list of top items purchased with stolen information, but Sift said the growing popularity of online ordering for these items makes them continued targets. In fact, theft is occurring in plain sight.
“Sift’s Trust and Safety Architects recently uncovered an emerging fraud scheme taking place on the instant messaging app Telegram, where professional fraudsters are teaming up with opportunistic online criminals via chat forums, in order to defraud delivery apps — in full view of the public,” it said.
Video game currency was the top item purchased by cybercriminals, followed by cryptocurrencies and site credits.
“Collectively, 2020 Sift network data illustrates a thriving fraud economy that grows more sophisticated, intricate, and costly by the hour,” the report said. “As e-commerce matures globally and businesses individually scale, they’ll naturally attract more customers — customers complete with credentials, credit cards, and user-generated content that fraudsters see as untapped opportunities for financial gain.”
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