Consumers and retailers alike are witnessing the explosive growth of e-commerce activity over the past two years, due in large part to the ever-evolving COVID-19 pandemic. Online shopping activity is unsurprisingly amplified greatly by the holiday shopping season, with the National Retail Federation (NRF) forecasting holiday sales during November and December to grow between 8.5 percent and 10.5 percent over 2020 to between $843.4 billion and $859 billion. This stark increase in digital transactions makes it the perfect landscape for fraudsters to hone their game in identity, retail and credit card theft. This holiday season and beyond, it’s imperative that consumers and online retailers alike fully understand these risks and how to protect themselves from fraud.
A unique challenge that has unfolded over the past year is managing supply chain shortages across all parts of retail transactions, also caused by the developing COVID-19 pandemic. The media attention surrounding supply chain disruptions has caused consumers to engage in panic buying, laying the groundwork for online scammers to target these vulnerable shoppers. Widely spotted online fraud scams that prey on unknowing consumers include, for example, phishing sites that resemble big-box retail sites to steal personal and credit card information.
It's also commonplace for fraudsters to pose as companies through SMS texts or emails that prompt the shopper to update delivery details or addresses. These schemes to mine personal data are becoming stealthier and more undecipherable from a legitimate transaction. With global retailers reporting 5 percent to 10 percent loss of revenue to digital fraud in the past year, these online scams are clearly putting strain on retailers and creating a significant loss to both buyer and seller.
In addition to online fraud, brick-and-mortar retailers have also sustained significant loss of revenue due to physical theft. The recent highly publicized rise in organized theft has influenced retailers to remove select and popular items from shelves and primarily distribute them online. In turn, physical retail locations are forced to invest in increased security measures, and consumers are turning their attention even more to getting their holiday shopping done online. This has created an ongoing storm of logistical problems, with more packages being stolen off of doorsteps and being delivered to the wrong location altogether — increasing costs for both the consumer and retailer involved to replace stolen property.
With these risks in mind, retailers and consumers need to know how to spot these scams and remain one step ahead of fraud. It’s imperative that retailers take every step to verify their customer’s identity to ensure the legitimacy of a transaction. Implementing device intelligence, phone-centric identity signals, and biometrics can be used to detect irregularities in data, and intelligently control and mitigate loss. Additionally, retailers should act to require more physical verification for deliveries, such as physical signature and ID requirements when packages are delivered, to ensure that the consumer’s identity is verifiable and that they've received their delivery. Additionally, consumers should always be alert and be aware of red flags such as lookalike sites, suspicious texts, and unwarranted demands for personal information.
Moving forward, complete identity verification at every step and increased cyber threat education is the key to minimizing risk during all stages of a transaction. Consumers and retailers alike must always keep these threats in mind and ensure that they’re taking measures to secure their data and protect against intelligent hackers and fraudsters, as we move into a more digitally reliant shopping landscape.
Mary Ann Miller is fraud and cybercrime executive advisor at Prove, a global proprietary phone identity network.
Related story: Black Frauday: 3 Common Fraud Attacks Aimed at Retailers
Mary Ann Miller, Fraud and Cybercrime Executive Advisor at Prove, is a well-respected expert in the fraud and identity space. Mary Ann was most recently Head of Fraud Strategy at Varo Bank where she led the fraud strategy process for transitioning the fintech to a nationally chartered challenger bank. By leading fraud management programs and applying advanced analytics, machine learning and channel security defenses, Mary Ann has helped financial institutions globally lower exposure to fraud in an increasingly digital environment. Mary Ann's previous directorships and executive roles in well known organizations like USAA, PayPal, Lloyd's Banking Group and other technology firms provide a strategic business perspective of fraud challenges. Mary Ann has previously served on the US Federal Reserve Secure Payments Task Force and has built a high-visibility reputation as a thought leader and global authority on digital fraud through media coverage on BBC News, NPR, American Banker, USA Today, and others.