Fraud shifts to mobile, loyalty in 2020

May 10, 2021 10:24 AM

Fraud is commonly viewed as a series of unique events such as a phishing attack, or target- based, such as romance fraud, or even by type such as unemployment fraud. Unfortunately, fraud is often so intertwined that a single event — such as Marriott’s 2018 data breach — often leads to another, such as synthetic fraud.

“Fraud no longer happens in siloed events,” said Jane Lee, a trust and safety architect at Sift. “Fraud may start with one bad actor and then spread to two or three other ones committing different crimes, so you have to be continually on the lookout.”

While many consumers reduced their spending levels in 2020, fraudsters didn't cut back.

Based on data from Sift’s Q1 2021 Digital Trust & Safety Index, fraud attempts increased across a wide swath of industries to take advantage of the changes occurring in many of them. The loyalty segment experienced a 275% increase in fraud attempts in 2020, almost three times the 2019 level.

Omnichannel retail fraud attempts rose by 50% in 2020 as retailers expanded their online sales or moved into the online channel for the first time. The transportation industry saw more than a 40% increase in fraud attempts, as cybercriminals sought to take advantage of cancelled vacations and business trips that were eligible for refunds. The online travel segment alone saw a 20% increase in fraud attempts.

The average size of each fraud attempt also grew in 2020, over 2019’s average in multiple industries, according to Sift. Hardest hit was the gaming and gambling vertical, which saw an increase of over 100%+ in 2020, as much of that industry went online as casinos, race tracks and other betting venues closed their properties.

“It’s no longer just a stolen credit card that might be used on a quick shopping trip to the mall,” noted Lee. “Fraudsters will take that stolen credit card and sell it online or share it with other fraudsters and it will pop up in other verticals such as gambling, crypto or remittances. It’s no longer a one-and-done fraud. Thieves find that they can increase the value by selling a card that can be used elsewhere.”

Scammers are no longer running their attacks from traditional desktop computers.

“Mobile fraud has grown considerably because of the convenience the devices can provide to threat actors,” said Lee. “Instead of being limited to a desktop located in a room, a mobile device allows fraud to be committed on the go and virtually at any time of day or night.”

Lee also noted that there are different types of criminals in the fraud value chain. Some can specialize in creating synthetic identities or testing stolen credit cards to see which ones are still active and which ones have been closed before selling them. The last set of criminals in the value chain are the ones perpetrating the attempts to defraud consumers, merchants and the government — many of whom are opportunistic. This can lead to a preference for a mobile device, as it allows more spontaneous criminal activity.

When it comes to victims of fraud, a large number of millennials and Gen X consumers tend to be caught in criminals’ nets.

Based on data from the FBI’s recently released 2020 Internet Crimes Report, about 27% of the reported cases of fraudulent crime involved consumers over the age 60, while 23% of victims were between the ages of 30 and 39 years — an important millennial age group.

While older victims may be perceived as easy targets, they may not be as heavy users of social media, email and other digital communication channels.

In contrast, middle-aged consumers between the ages of 30 and 49 years are both digitally savvy and have money to lose. In the FBI report, this age cohort comprised 39% of all victims in 2020.

While the number of fraud victims may be spread more evenly among the 30 and older crowd, the same isn’t true when it comes to the dollar value of losses suffered for each event.

Based on the 2020 FBI report, the cost of fraud losses reached almost $10,000 for consumers between the ages of 50 and 59 years and just over $9,000 for seniors 60 and older.

The high rate of losses for Gen Z consumers under the age of 20 was slightly higher than the cohort between 20 and 29 years, at $3,061 and $2,789, respectively. This age group may have had access to funds from their parents, which could have led to higher losses experienced.