The COVID-19 crisis is causing chaos across the globe, creating a fertile ground for fraud. I joined a virtual panel with Victor Reynolds – Roblox, Elizabeth Vogelsang – Chime, Timothy Davis – SoFi, and our moderator Markus Bergthaler – Merchant Risk Council, to discuss the emerging fraud trends in the wake of the pandemic.
Traffic patterns are showing abnormalities across all sectors, as a huge proportion of the global population adjusts to working from home, While some industries, including tourism and live entertainment, are in complete shutdown, others are thriving. Online gaming and communication platforms have seen an explosion in traffic, and have had to act quickly to cope with the growth in demand and the exponential rise in fraud.
The crisis is causing unemployment rates to soar as entire sectors remain closed, leaving billions of people facing poverty. The line between what is morally acceptable is becoming blurred for many people as they are forced to make difficult decisions about how to pay the rent and feed their families. This is causing a sharp uptick in friendly fraud and first-party fraud, ranging from low-level promo to chargebacks.
Gaming platforms attract large numbers of young users, who are typically more susceptible to fraud. There has been a massive increase in phishing scams, targeting in-game currencies and benefits. The ROI of these attacks is dependent on volume and fraudsters have been quick to capitalize on the growing gaming population.
There has also been a notable rise in griefing – the act of intentionally irritating or harassing other players or mounting automated attacks that leave thousands of bad ratings. Unlike other forms of fraud, there is little or no financial reward – griefing is purely malicious. Trolls are as bored as the rest of the population and are getting their kicks from causing distress to customers and reputational damage to businesses.
Fraudsters are used to moving quickly, adapting operations to fit the changing digital landscape. With governments pouring billions of dollars of relief funds into the economy, fraudsters are upping their attacks on banks and financial institutions to profit from these payments.
To protect vulnerable customers against fraud, businesses face the constant challenge of balancing good user experience while mitigating risk. This is especially important for banks and fintechs in the current climate, who are responsible for getting relief funds to customers as quickly as possible.
Our panelists agreed that friction should be industry and customer appropriate. For example, younger users are likely to be put off by complex authentication challenges.. At the business end, avoiding giveaways and promos that offer real monetary value can dramatically reduce the incentive for fraudsters. Businesses are seeing good results from social media campaigns that educate customers on potential scams, and how to protect themselves.
For some businesses, COVID-19 has caused higher traffic levels and attack volumes than ever before. Systems are pushed to their limits, which provides fraud teams opportunities to stress-test their defenses and future-proof their businesses. It is likely that the effects of the pandemic on consumer behavior and how businesses operate will be dramatic and long-lasting. To thrive in this unknown landscape, businesses should focus on adaptable, collaborative approaches to fighting fraud and protecting their customers.
Please find a 1-page LISTICLE summarizing the top 5 insights from the panel COVID-19: Fraud and Abuse Trends.
NEXT UP: Join us for our next virtual panel “Innovation in Payments, Innovation in Fraud”, where we’ll have guests from Bill.com, NY Times, i2c Inc., PayPal, and Arkose Labs to discuss how the companies are staying resilient to fraud amidst major payments disruption. Register below!