Fraudsters are getting more sophisticated every year, making it essential for businesses to take proactive measures to protect themselves and their customers from fraudulent attacks.

Consumer fraud is when an individual suffers a financial or personal loss due to unfair, deceptive, false, illegitimate, or misleading business practices, designed and used by fraudsters. Consumer fraud targets vulnerable consumers, be it an individual purchaser or a group of consumers, irrespective of age, gender, and status.  

As more and more consumers are turning toward online purchases in today’s digital age, fraudsters are leveraging anonymity and have more opportunity to attack through online platforms or with cyberbots. 

According to a global survey:

• $41 billion U.S. was lost to online payment fraud in e-commerce, globally, in 2022
• It is now estimated that online payment fraud is expected to reach $48 billion U.S. 

Types of Consumer Fraud

1. Identity Theft

In 2022, 33% of brands around the world experienced identity theft as a type of fraud, and it continues to be one of the top fraud complaints by consumers everywhere. This involves gaining someone’s personal identifying information for financial gain, such as a social security number, bank information, or card details. Identity verification and checking transaction trends are essential to protecting customers and employees from this type of theft. 

2. Phishing

Phishing was found to be the number one fraud attack experienced by merchants in the last year. Phishing is a deceptive tactic employed by fraudsters through email, wherein they attempt to entice individuals into visiting counterfeit websites. These fraudulent websites prompt users to provide sensitive and private details, such as passwords, account numbers, or transaction information, under the guise of legitimate requests. Without proper checks or fraud detection solutions in place, fraudsters are more successful in their phishing attempts, as their methods are getting increasingly sophisticated, appearing authentic at first glance.

3. Card Testing

Fraudsters use stolen card numbers to make small purchases online to check card validity. Then, they go on to make larger purchases or sell this information online on the dark web for other fraudsters to take advantage of. With the rise of bot technology, fraudsters can run thousands of transactions in a short period of time instead of manually entering information, allowing them to commit fraud faster and at scale. 

4. Scams

This type of fraud involves deception techniques employed to manipulate consumers to voluntarily part with their money or share personal information in exchange for monetary or non-monetary benefits. The sams are designed to generate financial gains for the perpetrators. The scammers use the latest technology to set up fake retailer websites that look like genuine online stores, using stolen logos and copied designs. Also called authorized push payment fraud (APP fraud), these scams are very difficult to catch as these are transactions that are conducted by authentic users, as a result of manipulation. 

How to Protect Your Brand From Fraud

What can brands do to detect consumer fraud before it damages their reputation and results in catastrophic losses for both them and their customers? 

Fraud Prevention Tools

Once a fraudulent act has been perpetrated, undoing the damage can be extremely difficult and time-consuming. Therefore, it is vital to have a partner who understands fraud and prioritizes proactive fraud detection and prevention. The right partner will be able to leverage leading-edge fraud detection systems with a dedicated investigative team to identify patterns, clusters, and nuances of fraud. This will empower you to combat fraudulent digital transactions, false claims or chargebacks, and a wide range of other fraudulent schemes and instances. 

Identity Verification & Account Security Software

Scammers are adept at committing identity theft through means like hacking and account takeovers, stealing private information of legitimate users. This information is also used to create multiple fake accounts that increase their anonymity and make money movement easier. Implementing a reliable identity verification process can help guard against this tactic, enabling you to identify potential accounts, reject suspect users, block fake accounts, and prevent unauthorized access to your network. Your brand trust and safety partner can assist you in creating and implementing identity verification and account security processes and measures to reduce your vulnerability to fraudulent activities drastically. 

Emergency Case Support

Should a fraudster successfully perpetrate your network or obtain a customer’s credentials, time is of the essence. The sooner you take action, the better your chances of minimizing the damage are. However, you may not have the in-house resources necessary to handle after-hours incidents. Partnering with a solution provider who can support your brand and consumers around the clock and at scale ensures protection from all existing and new types of frauds and scams. Your dedicated support team can address urgent incidents that pose an imminent threat to property or safety. By responding promptly, your partner company can perform effective damage control and contain the threat. 

Bug Identification

Fraudsters are notorious for exploiting bugs in web and mobile apps. No matter how closely you monitor your app, it’s impossible to identify every single bug as soon as it arises. You may not have the expertise or bandwidth to continuously conduct bug tests and you could be primarily dependent on customers to report them, so providing customers with an easy user interface (UI) for reporting bugs is essential. Establishing a method for documenting and escalating bug reports can help you resolve them promptly while improving CSAT scores. 

Red Teaming

When you launch a product, the assumption is that your platform is designed to protect from fraudulent activities. Red teaming involves conducting live tests to verify whether fraud prevention and detection controls are effectively aligned and coordinated within channels, across channels, and across different product types. This process aims to challenge the assumption that these controls are functioning optimally by putting them to the test in real-world scenarios. Having a partner in place with the experience and expertise of conducting tests at different stages of product design, launch, and lifecycle helps identify the gaps that can be utilized by fraudsters to commit fraud.

Be Proactive & Address Fraud Head-On

In today’s digital world, businesses face a constant threat of fraudulent attacks that can cause significant financial and reputational damage. By taking proactive measures to protect themselves and their customers, businesses can safeguard their operations and maintain trust with their customers. 

Contact IntouchCX today to learn about our leading trust and safety solutions, including data annotation and content moderation.