Retail Fraud Prevention and Protection: New Research

New Study: Retail Fraud Prevention & Protection Strategies for Evolving Attacks

Stuart Mann

Jun 10, 2021

This article is a summary of an Accertify commissioned study, conducted by Arizent Research. The resulting whitepaper provides insights, trends, and statistics from surveyed parties, which included merchants in global companies and fraud professionals from within those companies. Participants responded to questions about how their businesses are adapting to dynamic threats and implementing measures for fraud prevention.

While fraud has been an issue for merchants before the arrival of the COVID-19 pandemic, the rate of fraudulent activity has increased dramatically since the onset of the pandemic. Eighty four percent1 of merchants have experienced an increase in fraud over the past year.

Since 2019, fraud cost businesses roughly $42 billion worldwide2. These increases happened despite merchants focusing on processes and technologies designed to detect and deter cybercriminal behavior.

Between 2019 and 2020, fraudulently obtained account records published on the dark web rose 652%3 which can lead to a plethora of other fraud threats.  

While online payment fraud is reportedly the most prevalent type of fraud, new types of attack vectors are emerging and pose a concern for merchants:

  • Refund fraud, a concern for 35%1 of respondents
  • Identity theft, a concern for 30%1 of respondents
  • Gift card fraud4, a concern for 26%1 of respondents

Implementing the best technologies and processes to deal with these evolving threats is a critical task for merchants now and in the future.

Read on to learn about the three steps merchants should use to predict, prevent, and protect their platforms from retail fraud.

PREDICT: Retail Fraud Analysis and Early Detection

1.  PREDICT: Retail Fraud Analysis and Early Detection

The survey asked merchants to identify their most-monitored points of customer interaction. The following customer activities ranked as the highest:

  • Password changes: 47%1
  • Updates to saved personal details: 43%1
  • Logins: 39%1
  • New location (IP) being used: 32%1
  • Account creation: 32%1
  • Activity on dormant accounts: 31%1
  • New devices accessing an account: 30%1
  • Transfer/withdrawal/point redemption: 26%1

These are easy consumer touchpoints for cybercriminals to intercept. At the same time, valid customers also take these actions regularly. It is critical merchants can tell the difference to avoid fraud losses while also reducing friction for their best customers.

Accertify conducts a real-time risk assessment for every transaction using our award-winning technology. The platform analyzes transaction risk using criteria such as device intelligence, location data, behavior analysis, customer attributes, payment information, and information on the purchase and related transactions. From there, state-of-the-art machine learning models are used with established rules to identify good customers, reduce manual review, and highlight risky transactions.

This tuned and layered defense approach is critical to stop attacks before they happen.

PREVENT: Retail Fraud Prevention

2.  PREVENT: Retail Fraud Prevention

According to the study1, merchants in different industries face different types of attacks. One example is loyalty programs. Companies that have loyalty programs are especially vulnerable because these accounts may not be as stringently monitored. Bad actors can transform the assets contained in loyalty accounts — which may include miles, hotel stays, or points — into cash. Hospitality, airline, and even entertainment businesses frequently use customer loyalty as a way to secure repeat business. Elevated retail fraud prevention strategies are required if merchants are to enjoy the benefits of loyal repeat customers.

Retail fraud prevention relies on systemic implementation and enforcement of fraud mitigation tactics. Accertify’s standard API with day one risk decisioning helps merchants quickly and easily prevent fraudulent activities.

Preventing merchant fraud is a key part of a multi-layered approach to fraud prevention.

PROTECT: Retail Fraud Protection

3.  PROTECT: Retail Fraud Protection

Fifty seven percent1 of study respondents indicated that two-factor or multi-factor authentication is their most used tool to combat fraud. However, these methods can introduce friction for the user experience, which has the unwelcome consequence of reduced sales.

Sixty six percent1 of respondents report that they now use behavior analytics as an effective way to prevent fraud.

Accertify’s User Behavior Analytics measure how a user interacts with a site or a mobile app and is a key method of assessing the trustworthiness of a user. Each person interacts with their keyboard and mouse differently which is why this data is hard to spoof. The same applies for how they swipe on a screen, along with their typing cadence and the speed and rhythm with which a user enters data such as their email address or phone number.

Measuring and detecting a user’s behavioral signals is key for merchants, so they can differentiate between a good customer returning instead of an imposter.

Risk Assessment + Analysis + Reporting =
Comprehensive Fraud Management from Accertify

Accertify solutions provide the fraud management tools that merchants need. Accertify’s fraud management solutions have been developed by fraud experts who have been in the industry for decades.

Request a consultation to learn more about retail fraud prevention and protection and how Accertify can help you protect your business.

1Source: Arizent Research/PaymentsSource, December 2020/January 2021].

2Source: PwC’s Global Economic Crime and Fraud Survey 2020

3Source: Experian CyberAgent Technology

4Source: Federal Trade Commission