Striking fraud at the root—its economic viability—will help ecommerce platforms maximize revenues and customer trust while keeping fraudsters at bay this Valentine’s Day shopping period
Digital commerce has been on an upswing, contributing a major chunk of sales during online shopping days—be it Singles’ Day, Black Friday, Cyber Monday, or Thanksgiving. In 2019, retail e-commerce sales worldwide amounted to $3.53 trillion dollars, says Statista. Valentine’s day online shopping is expected to be no different.
A blockbuster winter holiday season is all set to stimulate the Valentine’s day sales as well with sales figures expected to clock $27.4 billion in 2020—a growth of 6.7% over 2019. The National Retail Federation estimates that 32% of the total sales will come from online commerce.
Convenience makes ecommerce popular
It is primarily the tech-savvy millennials who will drive the Valentine’s day sales. Compared to offline purchases, millennials prefer the convenience of their smartphones to search from a host of items, discounts and last minute deals while on the go. This makes ecommerce websites and apps so popular with them today.
Arkose Labs Q4 report states that mobile share of transactions grew 20% over the previous quarter, which further increases during the peak shopping period. On their part, digital commerce platforms offer frictionless onboarding, multiple payment options, same-day delivery, and so forth to attract and retain customers. Further, in an effort to increase their customer base ecommerce platforms also relax the barriers to entry.
Low entry barriers let fraudsters in
Taking advantage of the increased online traffic and relatively relaxed authentication measures, fraudsters slip in along with the genuine users to exploit the system through account takeover, fake account creation, and payment fraud. Fraudsters create new fraudulent buyer/seller accounts using stolen or fake user credentials, commit payment fraud using stolen credit card details, and takeover genuine consumer accounts for money laundering, fake reviews, or manipulating delivery schedules to dupe multiple consumers and then escape undetected.
During such high-activity periods, especially Valentine’s day shopping, fraudsters take identity fraud to a new level. They shop for desirable items such as mobile phones, tablets, and cameras—that can be quickly encashed—using compromised accounts or stolen credit card details. They collect the item from the victim’s address on the pretext that the item was delivered at their address in error. Since the item gets delivered against a genuine customer account at a verified shipping address, the fraud does not raise suspicion—neither with the merchant not with the compromised consumer.
Preparing to maximize exploits
That said, it is not to suggest that fraudsters suddenly emerge, attack the platform, dupe the consumers and disappear. Fraudsters prepare the ground much in advance to maximize the exploits during the peak activity period. They marshal their resources and employ bots, human sweatshops—or a mix of both—according to the economic dynamics at play.
In preparation for the big haul, fraudsters use credit card details bought off the dark web and stolen payment data to validate stolen credentials, create fake accounts, put up fake web-stores, process fake coupons, and ready bots or human sweatshops to attack at scale. Using easily available tools, fraudsters plant malware to steal payment and account details of loyal customers. They also use ransomware to hold businesses to ransom, who stand to lose out on revenues during peak shopping period, should they not comply to the fraudsters’ demands.
Fortifying defenses is imperative
Digital commerce platforms face significant risk of fraud and online abuse with a surge in factitious traffic. Financial losses, erosion of brand value and customer churn are some of the biggest threats that stare ecommerce platforms in the face during heightened shopping days. It is therefore imperative for digital commerce platforms to fortify their defenses with a long-term approach to fraud-prevention. They need an approach that not only makes them resilient to evolving fraud tactics but also helps genuine consumers continue to shop without unnecessary friction.
The Arkose Labs advantage
Arkose Labs protects global ecommerce players by making these platforms less attractive for fraudsters. Arkose Labs breaks the fraud model to progressively make the attack financially non-viable and forces fraudsters to abandon the attack. To learn more about our capabilities in fighting fraud plaguing the digital commerce players, click here.