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HOW ONLINE FRAUD AND ABUSE HAS ACCELERATED IN THE COVID-19 ERA

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By: Mairtin O’Riada, Co-founder and CIO, Ravelin

 

The Covid-19 pandemic has been hugely challenging for merchants across the globe. Sporadic lockdowns left our high streets deserted for months on end, and with a global economic downturn lurking around the corner, consumer confidence has been shattered.

However, there’s one industry that has flourished over the past year and that’s ecommerce. In the blink of an eye, we experienced a rapid acceleration of online shopping, driven out of pure necessity. According to eMarketer, worldwide retail ecommerce sales recorded a 27.6% growth rate in 2020.

But as the ecommerce industry has boomed, so too has online fraud and abuse. Almost all businesses that operate on an ecommerce basis have experienced a rise in fraud and abuse over the past 12 months, with each industry affected in slightly different ways.

But how exactly have fraud and abuse gone up over the past 12 months? And what types should ecommerce businesses be wary of?

 

Online payment fraud

The most obvious is online payment fraud. As many retailers enjoyed a boom in online sales, the buoyant ecommerce sector provided an attractive opportunity for professional fraudsters to take advantage of unsuspecting victims.

Online payments are a prime target for fraudsters as they don’t require the physical card, only the card details — which can be stored digitally. Online payment fraud costs merchants more than any other form of fraud, and the costs are still rising.

Ravelin’s Online Merchants Perspectives report found that during the pandemic, 39% of merchants experienced an increase in online payment fraud. It’s interesting to note that fewer retail merchants said there has been an increase compared to travel and hospitality, digital goods and marketplaces.

 

Account takeover

Our sudden reliance on ecommerce has also fuelled a rise in the number of account takeover (ATO) attacks, which happens when a fraudster maliciously gains access to a customer’s account credentials.

With typical online payment fraud, a fraudster creates an account and uses stolen card details to make fraudulent orders. However, with ATO, a fraudster gains access to a legitimate customer’s account, so account activity doesn’t ring alarm bells until the point that the fraud occurs. Login details are easily purchased online, and fraudsters often use credential stuffing to try numerous login and password combinations against popular merchant websites.

ATO leaves businesses vulnerable to both financial and reputational damage. Worryingly, in the past year 45% of all retail merchants have seen a rise in ATO activity. While across all industries, merchants are facing 2.6 to 4 major account takeover attacks each month.

When an attacker does place an order, they make three to four orders on average, with around a 50% success rate. Attackers can also monetise accounts in other ways, such as reselling, or extracting customer data to be sold online.

 

Refund abuse

The pandemic has seen many companies simplify their refund terms and conditions to win customers and drive growth. But in doing so, they have increased the risk of refund abuse — when a customer uses the returns policy of a merchant so much that it becomes unprofitable. Customers can also abuse refunds by faking returns or receipts, or reselling merchandise.

Refund abuse is most often carried out by genuine customers pushing their luck, especially at a time where many people are struggling financially. For instance, food delivery services may encounter claims that are difficult to disprove like ‘my food was cold,’ while fashion industries are experiencing instances of ‘wardrobing’, where customers return clothes despite having worn them.

According to Ravelin’s research, refund abuse is the fastest growing type of online fraud. Further research found that half of retail merchants have experienced an increase in refund abuse over the past year, with fashion (54%) and grocery (55%) merchants experiencing the biggest rises.

The prevalence of refund abuse can largely be put down to changing delivery patterns, such contactless deliveries. Disputes can quickly turn into a he-said-she-said situation, with no evidence to validate the word of either party.

High-volume retailers have also relaxed rules about collections and returns. While this is convenient, networks have become so vast that returns can be hard to track. Factor in a diminishing workforce and a door is left wide open to opportunistic fraudster to easily slip through the net.

 

Fraudsters are targeting subscription businesses

Now more than ever, subscription businesses are becoming an attractive target to online fraudsters. They rely on recurring card payments, offer in-demand products at a discount, and will often utilise promotions. To add to this, it’s estimated that by 2023 as many as 75% of consumer brands will have a subscription-based offering. With this increased success and popularity comes a higher risk of fraud.

For the customer, the benefit of recurring transactions is a completely frictionless experience. However, for merchants this can lead to an increase in unnecessary chargebacks. Customers often ‘set it and forget it’ and face an unpleasant surprise when money leaves their account. This buyer’s remorse is leading to more friendly fraud chargebacks.

When it comes to ATO, subscription accounts can be lucrative targets, as some businesses enable credit to build over time. Valuable accounts are targeted to attain and resell goods, or to sell on personal details — often by mimicking online subscription businesses in phishing attacks.

What’s more, organised promotion abuse and reselling schemes are emerging that can’t be ignored. We’ve seen fraudsters offering customers discounted prices for online access subscriptions by continuously signing up to free trials on their behalf. Similarly with subscription boxes, fraudsters are creating numerous accounts to repeatedly use ‘first box free’ promos and accumulate products to resell.

 

Staying one step ahead

With fraud risks growing and constantly changing customer behaviour, it’s becoming increasingly difficult for fraud teams to separate genuine customers from fraudsters. With this in mind, it’s vital that businesses implement the latest fraud detection technology to minimise the financial and reputational implications of fraud.

Artificial intelligence and machine learning software is proving crucial when it comes to detecting fraudulent activity. Its ability to spot unusual patterns by analysing online transactions and customer behaviour is unrivalled by humans — it’s also super-fast, cost efficient and far more accurate. What’s more, there are no diminishing returns. With a rules-only system, increasing amounts of payment and customer data puts extra pressure on the rules library to expand. But with machine learning it’s the opposite — the more data the better.

With ecommerce activity continuing to accelerate, it’s vital that ecommerce retailers act now to prevent and limit the impact of online fraud.

 

Business

IS SCARCITY OF TALENT THREATENING THE UK’S FINTECH CROWN?

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Opinion From Rafa Plantier, Head of UK and Ireland at Tink

 

From the Square Mile to Canary Wharf, London has been the historic centre of global finance, with long-established trading exchanges and trusted financial institutions. In the digital era, it has also ensured that it’s moved with the times to become a thriving hub for fintech.

But the UK financial services sector is now at an inflection point. In the past year, London’s position as a global fintech leader has been under threat. Earlier this year, Amsterdam overtook The City as the largest European share trading hub. The European Banking Authority moved from London to Paris. And Dublin, Paris and Frankfurt are all competing to win a greater share of the European financial marketplace.

The culprits of the shift are the twin challenges of the pandemic and Brexit, combined with the speed of technological transformation in financial services – disrupting the traditional flow of people, capital and ideas. So the pressing question for the industry is: how do we maintain and, more importantly, accelerate momentum to retain London’s fintech crown?

The answer revolves around one key thing — people.

 

Diverse talent drives innovation

Attracting the best talent is crucial if the UK financial services sector is going to continue to thrive and retain its global position as the preeminent financial centre.

In February 2021, the Kalifa Review laid out a strategy and delivery model for the UK to lead the fintech revolution, covering five key areas. These included skills and talent, investment and international attractiveness and competitiveness. But what became clear was that access to the right level of highly skilled talent was one of the biggest challenges for UK fintech, with barriers spanning both domestic skills shortages and the need to access foreign talent seamlessly.

As a native Brazilian in the UK, working for a Swedish-owned fintech, I understand these challenges as well as anyone. I love London, but we must recognise that fintech firms need unique talent and skills, and such a talent base can’t be met by a single city – not even one as resourceful as London. Not only do fintechs require technology and data specialists, but also experienced managers with good knowledge of high-growth companies and financial services.

As someone lucky enough to have worked with startup and scale-up fintechs across the world,  I understand the unique grounding that comes from being a part of a high-growth global company. That’s why I believe it’s vital that we attract people from across the world with commercial experience at ambitious, rapid-growth businesses — so they can bring this experience to bear on the UK financial services sector.

At the same time, many companies face renewed pressure to create new services and products to meet expectations for growth. That is why it’s critical that the UK has access to people with the right technical skills in areas such as software engineering, DevOps, Cybersecurity and data science.

Put simply, having the smartest minds delivering the best products is good for everyone. It drives efficiency, productivity,  growth and, ultimately, prosperity.

 

The UK is open for fintech

The UK should be proud of being a fintech pioneer and the driving force behind legislation that helped usher in the era of open banking. There is now an exciting opportunity to take this even further. Having access to a diverse pool of talent and skills will empower the financial services industry to create innovative products to tackle complex social challenges, such as better B2B payments, financial inclusion and climate change.

The good news is that the UK government clearly recognises the role the industry has to play in driving growth and innovation. The 2021 Autumn Budget reaffirmed commitments to reskill the nation. With £3.8bn budgeted for skills and a formal criteria for the long-awaited Scale Up Visa, the Chancellor announced a set of proposals that will support the breadth of our sector — from startups right through to unicorns and incumbent banks. This will be essential for fintechs like ours to continue to trailblaze and for the UK to differentiate itself on the global stage.

In an increasingly competitive global landscape, and to sustain momentum, we must keep talent avenues open to attract the best of the best in the industry. As one of the fastest-growing areas of the UK economy, the benefits of nurturing UK fintech to drive productivity, growth and lead the UK’s post-pandemic recovery, cannot be overstated. 2021 has seen a surge of activity in the industry and I am eager to see what London’s fintech sector can achieve in 2022.

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SET YOUR BUSINESS UP FOR SALES SUCCESS IN A POST-PANDEMIC WORLD

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SET YOUR BUSINESS UP FOR SALES SUCCESS IN A POST-PANDEMIC WORLD

Dean Fiveash, Head of FinTech Sales, IFX

Without doubt the Coronavirus pandemic impacted every aspect of our lives and fundamentally changed the way in which we all conduct business.

From the widespread adoption of working from home, to the amplified focus on employee wellbeing and work life balance, to simply acknowledging that people are more than their job titles and are often juggling childcare, pets and terrible wifi issues all whilst trying to do their job. The last 18 months have altered the way we work forever and in order to set our businesses up for success we have also needed to rethink how we operate.

Dean Fiveash

In a people facing sector like sales,  it’s  clear that the loss of face-to-face interaction is perhaps the biggest loss and an impending challenge as we slowly emerge from the confines of the pandemic. Gone are the days of instant downloads from ‘water cooler’ conversations with the team discussing deals or general matters. Instead, our inboxes and diaries are full of zoom catch ups. This isn’t to say that success has dwindled. Flexibility of working from home has helped many businesses to grow rapidly. In fact at IFX we have enjoyed our ten best months of company sales, but there is no denying the way in which we work within our teams has shifted. So how can you set up your sales teams to maximise its chances of success?

 

Adapting To The Times

For many businesses operating during these unprecedented times the shift towards the work from home culture has seen its benefits. Speed is key in the fintech industry and video calls on top of isolated working has greatly improved our time efficiency allowing us to do more for our clients in the long run. Equally, with the workforce being spread around the country and in some cases even globally, came the need for further rigorous checks and processes to ensure the high standards set in the office environment are still being met.

Despite this I would argue that this made us better sales people, and in turn a more successful and thriving sales team.

Post-pandemic success is grounded in not just the talent of your employees but also how you choose to structure your teams. For me, the old adage ‘People Buy People’ remains the most relevant factor for developing a slick sales team. At the end of the day, the technical stuff can be learnt over time but the proficient people skills needed in client facing roles is more innate.

When evaluating team skills, individuals who demonstrate determination and the ability to keep smiling through adversity are a vital asset, especially in the fast paced fintech industry.

Having worked in numerous team leader roles within the sales industry,  I know the difference that a collegiate and supportive team can make to successfully securing deals. The key is to have people at your disposal who are going to pitch in to help others, in turn making the team more robust. In the post-pandemic world, this will remain the key quality to look for and embed as a core value across the business.

 

Fostering A Successful Culture 

Whilst the team structure and core skills are an important part of the team set up, good management and personal development structure is crucial to success. At IFX, our sales leadership team all have client portfolios and are regularly signing and navigating deals. It’s through giving my team practical experience and regular client interaction that we can gain far better market insight than through managing team activity or KPIs alone.

More discipline is also required when working at home to retain the sales focus whilst navigating domestic distractions. As such, maintaining your employee motivation and focus is something each business should work on. A difficult feat without the physical presence of your team and one balanced on knowing your employees and their individual needs. But little things go a long way, so incentives and perks such as company socials, bonuses or simply a free breakfast can work wonders to motivate others. Another tip is to set  attainable goals and regular check-ins with your team to keep motivation on track to reach peak productivity.

 

Looking Forward

Team dynamics will continue to change to adapt to the ever-changing and rapidly evolving landscape, the secret to success will remain the same.

Something to look forward to in the next couple of years as a movement,  is the greater adoption of smarter contracts and embedded FinTech, which of course as businesses and as a team we will have to adapt to.

Ultimately, my biggest piece of advice to others is to get the basics right.  A leading-edge solution fails to achieve greatness if it isn’t backed with competent sales/relationship managers and attentive operational support. Traditional ingredients for success such as reputation and trustworthiness are built over time, often through word of mouth, but building a competent team who can make your clients happy is essential to that mix

 

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