Mobile Fraud, Declining Consumer Trust and Compliance Demands: Strategies for Retail’s Top Challenges
At this year's midway point, we’re still seeing the impact of data breaches continue to surface. And it’s becoming increasingly apparent that fraud and identity theft aren't going anywhere. In fact, they escalated in 2019, and the first half of 2020 is showing anything but the threat subsiding. Fraudsters are adapting their techniques and shifting their focus as quickly as the good guys can develop new technology. At the same time, a thriving dark web makes the processes behind fraud easier and cheaper.
My team at IDology conducts an annual study to discover emerging trends in the fraud landscape as well as to gauge consumer perceptions of digital privacy and identity. Our latest research revealed several key trends:
Related story: Report: Removing Customer Friction is Top Challenge in Preventing Fraud
- Fraudsters are flying under the transaction amount radar. Criminals are always probing defenses and determining how to commit fraud at scale while also taking steps to minimize the likelihood of detection. Over a 12-month period, the average transactional dollar value of attempted fraud attacks in the under $500 range has increased 31 percent. These low dollar amounts, when scaled across victims, can be easily missed by consumers as they scan their card statements.
- Mobile is at the forefront of identity verification and fraud. Mobile devices have become the center of our lives — from shopping to banking and establishing credentials — so of course they’re a rising fraud vector. The connectivity mobile devices support provides a critical and effective means of delivering authentication and biometric capabilities, but is also vulnerable to fraud. Nearly half of companies reported the same levels of fraud in the mobile channel compared to last year, with 28 percent reporting an increase in mobile fraud.
- Businesses are unprepared for sophisticated fraud tactics, namely synthetic identity fraud (SIF) and mobile attacks. Survey respondents reported SIF and mobile device attacks as the fraud vectors they feel their industry is least prepared to confront. This year’s report also once again validates SIF and mobile device attacks as the biggest threats. SIF in particular is a key concern, ranking as the top fraud type that executives believe will become most severe in the next three years.
- The trust gap between businesses and consumers is widening. There's clear misalignment in the trust that exists between consumers and businesses when it comes to privacy and digital identity protection. This so-called “trust gap” has wide-reaching impacts for both retailers and consumers. According to companies surveyed, the biggest casualty of large-scale breaches and settlements is the loss of customer trust. As business executives know from experience, the terms “safe” and “easy” don’t often align. And while most consumers are more aware that digital fraud is increasing and that their personal information is vulnerable, their patience with the processes that retailers use to identify and authenticate them remains limited.
- Compliance mandates are challenging businesses. Along with the ongoing challenge of minimizing anti-fraud friction, many businesses are confronted with a new world of consumer privacy empowerment that's inevitably opening new windows to fraud. The California Consumer Privacy Act (CCPA), which went into effect in January (yet many businesses are still not compliant), signals a fundamental shift in the privacy and data management landscape. IDology’s research points to CCPA regulations having a nationwide impact; consequently, U.S. companies, regardless of location, will need improved identity verification methods to ensure regulatory compliance, security, and seamless user experiences.
- Card-funded fraud, phishing and account takeover continue to be the most prevalent fraud schemes. Credit, debit and prepaid card fraud continues to lead as the most predominant form of fraud across industries, followed by phishing and then account takeover.
The Delicate Balance Between Fraud and Friction
Putting measures in place to deter fraud can also result in a higher number of hurdles for users to clear and, with those, a higher likelihood of frustration and process abandonment in favor of a competing service. In this balancing act, most businesses lean toward frictionless experiences at the risk of more fraud. While the decision to capture revenue over stopping fraud isn't surprising, it could result in greater material risks down the road.
This dichotomy can be a challenge for retailers, but there are solutions. A layered approach to identity verification and authentication that employs behind-the-scenes technology, consortium data, and machine learning to identify consumers with minimal friction can help deter fraud, ensure compliance, and maintain customer satisfaction.
Decreasing fraud risk is best done with a low-friction, or frictionless, consumer experience as well as communications on the importance a retail organization places on protecting personal data. When a company shares the steps it takes to ensure customer interactions are secure, retailers can put the consumer at ease and give them confidence that their data is safe.
Christina Luttrell is senior vice president of operations, including product, client solutions and marketing, for IDology, a leader in multilayered identity verification and fraud prevention.

Christina Luttrell is the senior vice president of operations including product, client solutions and marketing for IDology, a leader in multi-layered identity verification and fraud prevention. In her 10 years at IDology, Luttrell has significantly advanced the company's technology, forged close relationships with IDology customers and driven the development of product innovations that help organizations stay ahead of constantly shifting fraud tactics without impacting the customer experience. Luttrell was recently recognized as one of the Top 100 influencers in identity by One World Identity.