Managing the Fraud Prevention Risk Caused by Coronavirus

We’re all having to get used to a lot of changes during the current crisis, some more difficult than others. But there’s one group that excels at adapting. Unfortunately, this group is particularly good at finding new opportunities to succeed at other people’s — and companies’ — expense. Fraudsters are milking the situation already, and businesses need to be prepared.

Differing Responses to Suit Different Challenges

Fraud departments have already begun dealing with some of the immediate apparent consequences of the COVID-19 crisis.

Some industries, which are experiencing far fewer orders than usual, are adapting by scrutinizing orders more closely and picking out fraudsters who might normally fly under the radar. Others, which have been surprised by a sudden flood of customers, are trying to balance between attracting legitimate customers (avoiding false positives and friction) and letting fraudsters through due to overly permissive policies. For those businesses, manual review is more difficult since there are so many orders, but it’s just as essential as for companies with fewer orders.

Automated systems that rely on statistics about the past won't be reliable at a time when so much has changed. Manual reviews are vital to identify trends quickly and establish what the “new normal” looks like for your company and its customers. 

This information, in turn, can be used to build a new statistical model to suit the current situation and, perhaps, inform a “crisis model,” which can be used again in the future as necessary.

Gift Cards: The Good and the Bad

Gift cards are popular at the moment, for lots of good reasons. The biggest is a new trend: people are purchasing them as a way of supporting small businesses. Beyond that, gift cards are an easy way of making purchases in a hurry; they’re small ways to show someone you’re thinking of them even though you can’t be together right now; and they’re a good way to send groceries to someone in need — which is also popular right now.

Consumers who are looking to help businesses, and business owners looking to generate sorely needed revenue at this challenging time, may both fall victim to fraud. Gift cards are loved by the fraudster community. Essentially, as far as a fraudster is concerned, they’re free money. Instant, untraceable and monetizable by nature.

This is another area for balance; fraud prevention teams need to be careful not to turn good customers away, while using every trick they know to catch the fraudsters.

Success Comes From Adapting to Change

There’s a lot that’s changing at the moment, and it’s likely to be a period of flux as buyer patterns shift in response to a highly dynamic situation. To avoid both false positives and fraud, fraud prevention teams are going to need to be constantly adapting to the changes.

It’s a time when manual reviews, analysis of current trends, and collaboration with your peers in other companies are all absolutely crucial to success. Moreover, companies need to focus on identifying good customers, rather than just picking out the bad ones.

Examining data points for fraud signals isn’t going to be enough at the moment, because everything we thought we knew about fraud patterns and legitimate trends just doesn’t apply. Instead, explore ways to see someone’s good online presence. Real identities don’t change, they just evolve and become richer over time. Draw on that.

This isn’t a normal time in any sense, and fraud prevention is no exception. Your detection methods need to adapt to succeed.

Uri Arad is co-founder, vice president of product and research at Identiq, a peer-to-peer identity validation network and reduce fraud by using fresh real-world data.