By Tamas Kadar, Co-Founder and CEO of SEON, the fraud fighters
Across the world, life looks very different than it did just a year ago. In that time, it has been coping with the ongoing impact of the COVID-19 pandemic, which has resulted in alterations within many aspects of our lives. As governments around the globe are acting to treat, track and contain the virus, combatting it has become a cat and mouse game.
Yet, stopping the spread of the virus is not the only cat-and-mouse game that the pandemic has forced us to step up our response to. It has perpetuated issues that have been present for many decades – fraud.
Over the past months, I’ve set out to find what changes have taken place regarding fraud prevention during the pandemic and how businesses are facing up to these new challenges.
The digital boom and the fraud response
Sectors with a large presence in the digital space have witnessed this challenge first-hand. Industries across the board went through a period of mass digitisation as physical premises closed for business during the different lockdowns.
As the way companies conducted business changed, so too did customer expectations and consumer demand. With people across a range of demographics and localities much more comfortable with eCommerce, now that a huge chunk of spending is taking place online, it is highly likely that the increase in online traffic is a long-term change.
While that is an exciting prospect for many businesses who are now able to meet the demands of whole new demographics, they also need to be able to face up to the challenges that that poses. Fraud usually rises in correlation with online activity. Simply put, this is because there is more opportunity to commit it in the online space when online spending grows.
How are different industries responding?
As part of our recent research, we collected insights directly from clients to see how businesses were responding to this rise in fraud and what trends they have witnessed. When doing this, we selected four verticals which were either born out of digitisation or have adopted it to the point it has been transformational. These were iGaming, eSports, travel, and cryptocurrency and online trading.
In the iGaming industry, operators are taking familiar types of fraud that they would have paid little heed to in the past more seriously, such as bonus abuse and affiliate fraud. At the same time, many countries are tightening regulations and businesses need to maintain compliance while limiting friction points for their users.
Meanwhile, in the eSport industry, the characteristics of one of operators’ core demographics is currently causing issues. Younger, more tech-savvy audiences are finding ways to circumvent weak fraud prevention rule sets. Interestingly, some of the most effective methodologies for combatting sophisticated cybercriminals in this industry involve thinking just like them.
It has been a tough year for the travel industry. Losing money to fraud is the last thing that travel businesses need as they cope with reduced cashflows. Yet, that has not stopped certain types of fraud from growing throughout the pandemic, such as the use of stolen and fake IDs, stolen credit cards, and the instigation of fraudulent chargebacks. New issues have cropped up too as customers are giving false addresses and details in attempts to avoid COVID-19 related restrictions and tracking.
The travel industry’s response to these issues, sets it apart from others. What is unique about the sector is that operators meet regularly to discuss problems and share information. Rather than competing with one another when fending off fraud, they have banded together – this could end up being a highly effective way for the industry to create its own anti-fraud ecosystem.
Cryptocurrency and online trading
The crypto and online trading industry has experienced some particularly interesting and mixed changes throughout the pandemic. Survival during the turbulent period has largely been attributed to deeper digitisation, a focus on innovation and the success of remote working. Along with businesses’ willingness to adapt and think outside of the box, the very nature of digital currencies may have been a saving grace for many businesses in the sector.
With that said, the early months of the pandemic were fairly prosperous for cryptocurrencies and online trading. With more people stuck in the house, with more time and disposable income, the industry experienced growth and increased interest in ‘get-rich-quick’ schemes. However, this too had its downsides as it also led to a spike in fraud.
Crypto is particularly different to the other sectors. In what is comparably a more shadowy space, victims tend to be market entrants looking to buy cryptocurrency and instead end up stumbling into seasoned cybercriminals who access their card details.
Paradoxically, another change in consumer behaviour in the crypto and online trading sector that resulted in the growth of fraud was caused by the financial burden of the pandemic. With people losing jobs, some resorted to committing fraud to make ends meet.
Security around in the crypto industry is improving though. Technology is being implemented to screen for suspicious behaviour. Using solutions that reduce friction during the identification process have been used to flag suspicious users, create accurate profiles around irregular accounts and maintain a smooth customer journey.
Fraud in the new normal
So, it is clear that while fraud trends have changed for these industries, there’s no one-size-fits-all when it comes to understanding what those changes are. Each industry is feeling the heat in various ways and are responding to it differently, whether that is tightening regulations, clamping down on previous issues, or unifying with other businesses to achieve a common goal.
What is uniform across all highly digitised industries though, is that businesses within them must understand that fraud prevention is an evolving practise. Choosing the right tools is critical for this – they must be adaptable, flexible and must not infringe on the customer journey. A smooth checkout experience is key in the bustling online space.