Data: The newest holiday fraud threats

December 5, 2018 2:14 PM

The first wave of data from this year's holiday shopping season is in, providing insights into where the biggest fraud threats are likely to originate in the final weeks of the year.

Phishing scams are on the rise globally, and authorities worldwide have reported a surge in spoof websites and other tactics designed to trick consumers into sharing payment card data to get steep discounts on brand-name goods.

The newest areas of concern surround higher-than-average ticket size for suspicious transactions, P2P scams and a lower consumer caution around online and in-store shopping. This is particularly risky given the rise of mobile commerce, which is driving fraudsters to target the mobile channel and the large sector of millennials who are expected to drive the biggest increase in spending this year, with a disproportionate number using mobile devices.

Digital retail payment transaction volume is on track for a sharp increase this year, according to LexisNexis Risk Solutions' ThreatMetrix, which analyzes global online transactions.

Digital payment volume was up 20 percent during the key holiday shopping days between Thanksgiving and Cyber Monday 2018, compared to last year, the ThreatMetrix report said.

The ticket size of all transactions during the first week of this year's holiday shopping season was up sharply over the average, Threatmetrix said. But so were the sizes of suspicious transactions merchants rejected. The average total value of rejected transactions during the first few days of this year's shopping season was 2.7 times higher than the value of good transactions. "Fraudsters are capitalizing on the busier holiday period to attempt to hide larger-value fraudulent transactions," the report said.

Cash and check volumes still dwarf person-to-person bank transfers, but P2P volume is expanding with the adoption of Venmo, Zelle and other P2P mechanisms including Fiserv's Popmoney service. This year could be a tipping point for the use of P2P to send cash gifts to friends, family members, teachers, babysitters and other providers, some data indicates.

According to Fiserv, P2P transfers tagged as "gifts" soared 10 percent to 47 percent above the usual baseline during last year's holiday season.

Analysts say certain types of P2P fraud may surge this year, particularly from nefarious schemes tricking customers into improper payments.

"Many consumers don't understand that the zero liability they enjoy with payment cards doesn't extend to most forms of P2P, and we've already seen plenty of incidents of people sending a P2P transaction to pay for a bogus Craigslist posting," said Julie Conroy, a senior analyst with Aite Group. "Those incidents will only increase over the holidays with the increase in e-commerce."

Mobile and e-commerce sales are surging, but brick-and-mortar stores still account for the vast majority of sales. Yet consumer data indicates consumers are equally at risk for identity theft when shopping online or in stores.

Eight percent of U.S. consumers said they have been victimized by identity theft in the past during the holidays, according to a recent survey Experian conducted. Among those victims, the incidents happened both when they were shopping online and in stores. More than a quarter, or 27 percent of respondents said their identity was stolen when shopping online during the holidays, and the same amount, 27 percent, said they were victimized using a credit card at a retail store, Experian said.

Sixteen percent of consumers said their identity was stolen when shopping during Cyber Monday following Thanksgiving, while 8 percent said they were victimized by having their mail stolen during the holidays. Another 5 percent had their wallet or purse stolen during the holidays leading to identity theft, and 17 percent attributed to the crime to another incident. Experian surveyed 1,000 U.S. adults online between Sept. 27 and Oct. 7, 2018.

The ongoing waves of data breaches have eroded consumer trust, according to widespread research. But apparently the news about greater exposure of consumers' personal data on the Dark Web is also wearing down their faith in the protective measures they take to prevent fraud, according to a recent survey from Accenture.

The percentage of consumers who said they plan to shop only from trusted brands has declined to 57 percent this year compared with 64 percent last year, while those who plan to take all recommended precautions around using passwords and security updates has declined from to 43 percent from 59 percent, according to Accenture.

Fewer consumers will avoid smartphones — 20 percent this year versus 23 percent last year — and this year 11 percent of consumers said they don't plan to do anything to protect themselves when shopping online, up from 6 percent who said so last year. Accenture surveyed 1,500 U.S. consumers in July and August of 2018.

Criminals aim for the biggest target, and this year it will be young adults with payment cards. Millennials are expected to spend the most per capita this holiday season, and they will lean hardest on debit and credit cards, according to a recent survey by Accenture. About 60 percent of all consumers will pay with a debit card, with 55 percent planning to use a credit card. The majority, or 65 percent, of credit card users will use a rewards card, 32 percent will use a card with no rewards and 28 percent will use a proprietary store card, Accenture said.

Fourteen percent of consumers will make holiday purchases using a prepaid card, while mobile wallet apps will account for only 11 percent of holiday purchases, equal to the amount planning to pay with checks. Four percent of respondents said they plan to make holiday purchases using cryptocurrency.