The Retailer Spring Edition 2023

THE RETAILER

22

THE DIGITAL TRANSFORMATION OF ORGANISED CRIME

Xavier Sheikrojan Senior Risk Intelligence Manager Signifyd

H ow fraudsters are out smarting merchant tech and what retailers can do to stay ahead

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Risk Intelligence One increasingly common example of auto mated attacks that Signifyd’s risk intelligence team observes is card testing attacks, where fraudsters can test thousands of stolen cards on a retailer’s platform through automated scripts, all in a matter of seconds. While the values per order may seem low, losses can be dramatic if these attacks aren’t identified and stopped. In fact, card testing was the second most prevalent form of organised fraud impacting retailers in 2022, according to Experian , and is expected to remain a threat alongside phishing, chargeback fraud, and identity theft in 2023. As these tactics become increasingly advanced, fraudsters are identifying more opportunities to exploit weaknesses in merchants’ operations. Any retailer can be a target when it comes to these automated attacks. However, in using a fraud prevention solution that taps into a large network – Signifyd’s for example is the largest outside Amazon – merchants can pull from trends in wider retail data to identify, flag, and stop these types of attacks before they wreak havoc.

Fraud rings are actively scaling and growing their capabilities built on strong machine-learning investment and leverag ing artificial intelligence in the same way as merchants.”

Gone are the days when fraudsters were tech-geeks in hoodies launching attacks and committing crimes from the comfort of their darkened garages. Today, crime is organised. Fraud rings are actively scaling and growing their capabilities built on strong machine-learning investment and leveraging artificial intelligence in the same way as merchants. By leveraging technology strategically, fraudsters are now able to launch multiple attacks with the click of a single button. To execute different forms of fraud, fraudsters can even automate many attacks. A worrisome example we’ve seen over the past year is the rise of a Southeast Asian fraud ring which quickly scaled up after testing the waters under fraud radars. This has hit the industry extremely hard and fraud prevention professionals have been working tirelessly to combat their evolving patterns and tactics. What this ultimately means is simple yet two fold: fraud has become a form of organised crime, and it’s going through a digital trans formation. For merchants, this means they will have to keep ahead of the game through intelligence, investment, and innovation to outsmart these types of increasingly intelligent criminal networks. All of this while many merchants are stepping up their omnichannel offering. That means merchants need to look at three core areas:

Investing in smart technologies

In Europe, Strong Customer Authentication (SCA) regulations have been put in place to stop fraud, but doing so has placed strain on mer chants who now not only have to grapple with fraud prevention but also have to work even harder to ensure a smooth customer experience. Our 2023 Annual State of UK Commerce Report found that 36% of shoppers in the UK have had to abandon purchases because of trouble with SCA while checking out, and nearly 7 in 10 (68%) said they’d opt to move to a large retailer over a smaller one if having a bad experience. Furthermore, 71% said they would rank SCA problems a 5 or higher on the frustration metre (scale of 1-10) when shopping online. The challenge for retailers is apparent, but by using advanced SCA tools, merchants can avoid unnecessary losses in customers and revenue. Technology like analytics tools and exemption management validate transactions seamlessly in the background. That means retailers are better able to identify transactions which do not need to be authenticated. This will then lead to increased conversions while promoting better, more seamless customer experiences, leaving less money on the table and building on customer loyalty.

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This digital transforma tion is one of the biggest threats facing retailers and their customers in the years to come, so the best thing retailers can do is to combat AI with AI.”