As internet traffic surged about 60%, money spent by online shoppers nearly doubled. The average value of attempted fraudulent purchases increased 69% year-over-year, according to a recent report from the digital fraud prevention company, Sift.
Mobile shopping reached $284 billion in spending, equal to nearly 45% of all U.S. e-commerce sales. Nearly, 62% of attempted payment fraud attacks came from mobile devices in 2020 compared to 51% in 2019, the Sift report stated.
Consumers and businesses alike faced the deceit of fraudsters. Nearly 70% of executives surveyed said that increased fraud attempts had a major impact on their operations while 68% of executives said that remote working limited their ability to prevent fraud within their organization, according to separate research from the credit analytics firm FICO.
More than $1 trillion was stolen in 2020 due to cybercrime, according to the Sift report. As online and digital transactions increased due to stay-at-home orders, fraudsters had a new avenue to exploit consumers.
Fraudsters targeted e-commerce, digital wallet transactions, and digital currency transactions the most in 2020. Professional marketplace transactions saw a 66% increase in fraud attempts with a 20% rise in average order value whereas digital wallet transactions experienced a 33% increase with a 9% jump in average order value, according to the March Sift report.
As the pandemic kept people working and shopping from home, many brick-and-mortar stores pivoted to provide their services and conduct transactions online.
“Businesses that may not have had a huge digital presence were forced into that arena in order to survive,” Kevin Lee, trust and safety architect at Sift told Payments Dive. “And because of that, there were a lot of cracks or things that they didn't necessarily think of when they entered this new world, and unfortunately it is an amazing feeding ground for these fraudsters to proliferate and really do bad things.”
Sift, a digital fraud prevention company which uses machine learning to analyze and stop fraudulent transactions, saw an exponential increase in fraudulent activities in 2020. The San-Francisco-based company provides fraud prevention tools for online merchants, payment processing platforms, and account takeover attempts by analyzing vast swaths of data and pinging the merchant about unusual transactions. Sift serves more than 34,000 apps and websites like Airbnb, DoorDash, and Wayfair, collecting data from their platform on how fraudulent transactions are evolving.
In 2020, loyalty merchant programs saw a 275% increase in fraud attempts while neobanks saw a 60% increase. Sift recently partnered with McDonald’s to provide digital protection to McDonald’s app when customers are paying for their orders.
The company also saw an increase in e-commerce fraud attempts during online checkouts. Fraudsters sometimes disguise themselves as charity organizations and ask customers to donate. The pandemic drove online giving up by 20.7%, providing cover to fraudsters who hide behind traffic and transaction surges, knowing that many merchants won’t be equipped to handle scaling demand and rising fraud simultaneously, the report stated.
“These ‘Cart Crashers’ create these charity websites and get hold of a consumer’s card details,” Lee said. “They later use the card for extraordinary purchases, so there is a double-dipping going on there.”
Fraudsters are also getting bolder with their attempted purchases using consumers’ money. According to Sift, in 2020, fraudsters attempted to buy luxury products like a $500,000 Patek Philippe watch and nearly $484,000 worth of cryptocurrency.
“As digital currencies and NFTs are picking up popularity among consumers, we are seeing more fraud attempts on that asset class,” Lee said. “Given that they are digital assets and usually untraceable, it makes an easy and high reward target for fraudsters.”
Attempted fraud on crypto transactions rose by 4.6% in 2020 and cryptocurrencies were the second most purchased item by fraudsters using stolen money.
Nearly 36% of organizations don't have sufficient resources to fend off fraudulent attempts and 45% believe that such events create a negative impact on the customer experience, according to FICO research released today. Furthermore, 54% of institutions believe that there is an increasing need to better identify emerging financial crime challenges and 38% want to increase their speed of response to such challenges.
“The pandemic put stress on numerous industries and functions...as fraudsters tried to take advantage of new opportunities and changing customer behavior,” TJ Horan, FICO’s vice president of product management, said in a press release. The findings illustrate how teams managing fraud are demanding flexibility, centralizing decision-making, automating operations and integrating platforms to be more effective, he added.