Ecommerce Fraud Detection during the Pandemic

The coronavirus pandemic has led to significant changes in consumer purchase behavior and raised concerns about ecommerce fraud.

Fortunately, overall ecommerce fraud does not appear to have risen disproportionately to the number of online purchases.

“We haven’t seen a significant change in the amount of card-not-present fraud at this point,” said Eyal Raab, vice president of sales and business development for Riskified, an ecommerce fraud prevention firm.

“There has been some fluctuation across industries, but that’s not uncommon. What we have seen is a change in shopping behaviors,” Raab continued.

“What we have seen is a change in shopping behaviors…”

“For example, we’ve seen a substantial increase in consumers using mobile apps to make purchases with a decrease in the percentage of orders placed via desktop or mobile web. That fits. People are staying home instead of going to an office, so they’re spending more time on their mobile devices.

“We’re also seeing people changing what they buy, with big increases in food purchases, fitness equipment, and home improvement goods. All of that makes sense.”

Areas of Concern

Although, as Raab said, there have not been significant changes in the percentage of transactions impacted by fraud, merchants do need to be aware of changes in how fraudsters work.

“Ecommerce is changing rapidly during this global pandemic, with some industries experiencing large shifts in transaction volumes or more requests for faster shipping,” said Rich Stuppy, chief customer experience officer at Kount, a fraud prevention firm.

“Especially in these circumstances, fraud prevention isn’t just about stopping chargebacks, but it also plays a role in approving and expediting orders as well as stopping policy abuse that leads to reselling and retail arbitrage issues. It will be critical to monitor fraud trends in the coming weeks, as chargebacks begin to roll in from this period.”

Stuppy’s comments are consistent with recent data from TransUnion, a consumer credit bureau. Some 22 percent of the 1,068 American adults TransUnion surveyed claimed they had “been targeted by digital fraud related to Covid-19.”

“It is clear that social distancing has changed consumer shopping behaviors globally and will continue to do so for the foreseeable future,” said Greg Pierson, senior vice president of business planning and development at TransUnion. “No doubt fraudsters will continue to follow the trends of good consumers and adjust their schemes accordingly.”

Effectively, this means crooks and cheats that had been hacking, phishing, social engineering, or employing romance and banking scams to steal a consumer’s identity have modified their tactics to include Covid-19-related messages and mimic stay-at-home buying behaviors.

Raab reiterated, “We haven’t seen a significant change in the amount of fraud, but we have seen changes in overall volume for some industries.

“Industries where legitimate purchases have slowed — but fraud has remained fairly constant — may seem particularly risky right now, but that’s generally because of the decline in legitimate customers and not an influx of fraudsters.”

False Positives

Thus, on the one hand, ecommerce retailers need to pay attention to fraud trends. While there may not be lots of fledgling thieves attacking the industry anew, the methods established cheats use are likely to be changing.

Practically, this could mean that ecommerce retailers need to be careful when accepting and fulfilling “questionable orders.” But those same retailers also need to be aware of the potential for relatively more “false positives” thanks to changes in how legitimate, trustworthy customers shop.

“If merchants are used to one pattern and see a rapid increase in something unfamiliar — stockpiling food or buying treadmills through a mobile app, for example — they need to make sure that their systems adjust to approve those orders rather than viewing them as suspicious and possibly declining them,” said Riskified’s Raab.

Raab’s firm, its competitors, and TransUnion, have all gone to great lengths to help ecommerce merchants approve more transactions. The goal of fraud detection and prevention is to filter out the crooks while accepting good customers who might be exhibiting a new behavior or shopping in a new way.

Raab added a bit of advice for ecommerce retailers who are particularly concerned about fraud during the pandemic.

“Try not to overreact to fear of fraud. Things can change, of course, but the pandemic didn’t suddenly create legions of new fraudsters. So there’s no reason that ecommerce merchants should expect increased risk,” Raab said.

“Rather, think about the current climate, and make sure you and your systems can rapidly adjust. Recognize that shopping has changed worldwide, and patterns that triggered alarm bells in the past could be people adjusting to the new normal.

“If merchants can adjust to those changes, they’ll be able to approve as many legitimate orders as possible, and consumers will get their goods.”