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Top 5 Holiday Season Fraud Trends

Published

4 months ago

November 23, 2022

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By Doriel Abrahams, Head of US Analytics, Forter

With International Fraud Awareness Week and the holiday shopping season officially underway, analysts and retailers are diving into customers’ shopping habits. But it’s not just legitimate customers retailers need to be aware of, as fraudsters are just as keen on holiday shopping — and they’re already hitting online stores.

Here are some of the top trends we’re seeing as we enter the peak of the holiday shopping season.

Trend 1: Amateur Fraudsters on the Rise

I’m following this trend with fascination as it develops. A growing number of customers that Forter recognises as legit shoppers from years of good purchases are suddenly going over to the dark side.

These are not career fraudsters but ordinary consumers turning to fraud as supplementary income, almost like a new (lucrative) hobby. We’ve seen a 35% increase in fraud committed by “non-professional” fraudsters (YoY comparison), which is astonishing. The trend is particularly prominent in North America.

These amateurs are more likely than professional fraudsters to target items closer to a regular person’s wish list – Phones, gaming consoles, luxury goods, etc. – as opposed to the strategic goods targeted by professional fraudsters.

To be clear, just because these activities are conducted by formerly “good” shoppers, this isn’t considered friendly fraud — but rather standard credit card fraud using stolen card data. What gives them away to us as amateurs is their technical sophistication. They’ll often use their own devices, and if they engage in obfuscation, it’ll be something basic like a VPN.

Trend 2: Increase in Coupon Use

Coupon usage is up this year as consumers are more conscious of their budgets than ever. Between 2020 and 2021, coupon use was fairly steady. But this year, we’re already seeing an ~11% increase. It’s a trend most marked in the USA, but the trend is reflected globally.

Fraudsters who follow trends in buyer behaviours as avidly as any retailer have become aware that coupon use is increasing during the holiday season. They don’t need the coupons themselves, but they’re happy to use coupons to make their persona look more legitimate and convincing (so, merchants— don’t give customers a free pass just because they come with coupons!).

Moreover, good customers aren’t above trying a bit of coupon abuse. They might try reusing or stacking coupons, sometimes setting up multiple accounts to get more than they’re entitled to. Ensure your company has clear policies about this and that your systems are configured to reflect those policies. If your policies will become a pain point this holiday season, now is the time to raise a flag with marketing and operations teams. If it’s too late to change things this year, make sure you bring it up early in the new year so there’s time to set new policies before the next coupon rush.

Trend 3: Popularity of Gift Cards

During the holiday season, good customers turn to gift cards as an attractive option for giving loved ones a thoughtful but flexible present. But this uptick in good transactions means it’s easier for fraudsters to hide in a rush – and they know it.

Gift cards are always popular with fraudsters because they’re anonymous, easy to resell, don’t require a shipping address, and can be used as part of a chain of fraudulent activity. Effectively, it’s free money for fraudsters (I’ve written in-depth about gift cards and how attacks are changing in 2022 here).

Gift card purchases don’t generally start spiking until after Black Friday and Cyber Monday. After that, there’s a preliminary peak of gift card purchasing around mid-December. But the pinnacles come on Christmas Eve when consumers realise, they are out of time and a gift card is the best option. Gift card purchases are usually 6x or 7x more frequent on Christmas Eve than on November 1, which is pretty striking and puts a lot of pressure on fraud teams.

The trends show that this pattern repeats annually. But this year especially, fraudsters are getting in on the act much earlier, having already started doubling down on gift card attacks back at the end of October. This might be due to a trend in which fraudsters focus on attacking retailers selling gift cards instead of gift card-specific merchants. If they’ve found vulnerabilities there, it makes sense that they’d be attempting to exploit them during the extra vulnerable holiday season.

Trend 4: Low-Tech Address Manipulation

Fraudsters have increasingly found sophisticated ways to get around Address Verification Systems (AVS) that verify physical addresses. However, keeping track of the simple tricks they exploit is just as important. It doesn’t matter how simple it is if it evades your checks and causes loss.

This season, fraudsters are getting creative about tricking AVS systems in ingenious, low-tech ways. For example:

Instead of writing 1, they’ll write “one” because AVS famously only checks numbers, not words. So, it’s not a mismatch.
Instead of writing the address in the address field, they’ll put it as part of the name field, so it doesn’t get checked.
The shipping address can then be “see name,” which is understandable for the courier but doesn’t get flagged by the AVS or other checking systems. (Note: Forter’s Trust Platform does flag these types of circumventions – most other systems do not, so it’s vital to ensure you’re protected)
Similarly, they’ll add some nonsense element to the address so the machine can’t see that it’s the same address used multiple times. Still, the human courier has no trouble making the delivery.

This kind of trickery is happening a lot. And during the holidays, fraudsters know it’s often harder for merchants who rely on manual review to catch this sort of thing.

Trend 5: Battling Bots

There’s been a significant uptick in bots in recent months, and it’s a trend that’s starting to impact industries that haven’t typically been primary bot targets. Our data shows that it is generally a large, professional operation utilising sophisticated technology at extreme volumes.

Bot attacks happen at checkout, of course – but are also happening increasingly at various points in the account journey, including account creation and login. Often, the sites attacked this way will all be in the same vertical, giving an interesting insight into the fraudster’s thought process.

Unfortunately, bots are another trend that fits well into the holiday season. When traffic is heavy, bots might find it easier to fly under the radar. Moreover, Forter’s data shows that apparel and footwear merchants that engage in limited stock drops or short time frame sales are good industries to focus on when looking at bot behaviours as they are particularly vulnerable – facing 5-6x more attacks than merchants who don’t engage in similar drops or sales.

Stay Safe, and Good Luck!

The holidays are a stressful time for many online merchants. The potential of a rapid increase in revenue, combined with the potential for declining good customers, leaves teams overwhelmed when handling large volumes of orders.

It’s hard to keep track of evolving trends when you’re focused on ensuring that all good customers get their great deals and that bad actors don’t get through. I hope this article helps shed some light on how things are evolving this year and gives you some hints about what to check in your data to ensure your company is protected this holiday season.

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Top 10

5 Often-Overlooked Investment Options To Consider Exploring In 2023

Published

1 week ago

March 17, 2023

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When choosing what to invest in, many people will initially focus on the stock market which is considered a more mainstream investment. However, investments are more than stocks, and there is a wide range of alternative investments you can add to your portfolio to not only add growth to your long-term returns but also to spread the risk. If you’re looking to diversify your investments or if you simply want to get started with something different, this guide will cover the overlooked investment options that you should consider in 2023. From investing in EIS schemes and commercial property to commodities and collectables, there is plenty to discover.

EIS Schemes

One of the first on our list of overlooked investments is EIS investment opportunities, one of many flagship policies developed by the UK government to support early-stage companies. With an EIS investment, you would be helping to support businesses in exchange for various tax reliefs. Depending on your circumstances, this could include 30% income tax relief, tax-free gains, CGT deferral, loss relief, or inheritance tax relief. To understand more about investing in EIS schemes and their benefits, head over to Oxford Capital, to learn more.

Property Bonds

When property developers are looking to finance new commercial or residential projects, they typically do so with property bonds. These bonds are used to raise capital for the projects from investors and typically last for a fixed term, between two and five years. This form of investment is attractive due to the higher interest rates, ranging from 4% to 15%, offered in comparison to traditional government bonds, which generally perform at under 4%.

While there is a risk that the project could be abandoned due to external factors such as a rise in material costs, disruptions to supply, and a lack of finances, if the project goes to plan, you will see a return of your original investment as well as any interest accumulated. However, you can also opt to receive the interest payments monthly, quarterly, or annually throughout the course of the project, in which case, at the end of the project, your original investment will be returned with any leftover interest that has not yet been paid.

Commodities

The term commodity encompasses a variety of physical investments you can make. Unlike traditional investments such as stocks, bonds, or funds, these investments have both a use-value and an exchange value. This is because when you invest in commodities, you gain ownership over a small amount of the resource you are investing in. As there is always a need for physical goods, these commodities are an excellent way to diversify your investment portfolio and hedge against inflation, market changes, and the depreciating value of different currencies.

Some of the most common commodities you can invest in include:

Gold.
Agricultural products.
Crude oil.
Precious metals.
Timber.
Diamonds and other precious stones.
Spices, sugar, and salt.

Commercial Property

When looking into properties to invest in, many people choose residential options as they can renovate and sell or rent these homes. However, as the property market can be particularly volatile, a great option when you want to invest in properties is to look to commercial options instead. When it comes to commercial property, there are many ways you can invest, and these include:

Direct investment:This means buying a share or all of a property, which can then be rented out to businesses.
Direct commercial property funds:Often referred to as bricks-and-mortar funds, this is the most popular way to invest in commercial property. With this fund, you invest into a scheme that invests directly into an existing portfolio of commercial properties, which pays out the interest of your investment monthly, quarterly, or annually.
Indirect property funds:Similar to the direct commercial property fund, with this fund, you would invest in a collective investment scheme that invests in the shares of property companies in the stock market.

Peer-To-Peer Lending

Peer-to-peer lending is a risky venture where you would invest directly into start-up enterprises in order to help them get off the ground. It’s an excellent way to help small business owners get going with their dreams while also creating a lucrative investment. When you choose peer-to-peer lending, you loan the start-up a specific amount with the promise to pay back with interest. You can determine a timeline for this, or you can also choose to have the interest paid back monthly, quarterly, or annually.

However, as already mentioned, peer-to-peer lending is a risky venture, as the company you invest in could fail, and in that case, they would default on your loan. With this in mind, before you choose peer-to-peer lending, you should always thoroughly research the start-up’s fundamentals first, as this will give you a better insight into the viability of the business.

Finance

Innovating inclusivity: How invoice financing is diversifying access to financial streams

Published

1 week ago

March 15, 2023

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“Entrepreneurs, particularly those in the supply chain in Europe, the United Kingdom, and indeed the rest of the world, frustrated with the lack of access to traditional financial streams should consider invoice financing,” writes Morgan Terigi, Co-Founder and CEO of Incomlend

While the COVID-19 pandemic negatively impacted many businesses, the crisis was a moment of opportunity for others: As norms related to work, schooling, and life changed in the blink of an eye, many entrepreneurs started businesses to address related needs.

Many of these businesses grew dramatically. Now that the pandemic has settled, however, some of these businesses are hitting a plateau. Despite being profitable, they do not have enough working capital to grow the business further. They only have enough to maintain their current levels of profitability, but nothing more.

Some of these entrepreneurs will seek financing the most common way, via a bank loan. Unfortunately, this avenue will likely be inaccessible to them. Bank loans will favor organisations that have been in business for a long time, not those newly formed within the last few years. They may also require collateral that such businesses will not have right now. Some businesses created during the COVID-19 pandemic may meet the bare minimum requirements and go through the lengthy application process. They will meet with a banker, submit the necessary financial documents, including everything from financial statements to trade references, and then wait. This waiting period is actually the longest part and may encompass anywhere from a few weeks to months. After all this bureaucracy, the entrepreneur will get a denial from the bank. But, they will not be getting any financing.

Such time represents a major opportunity cost for the business leader. They could have spent the same amount of time either focused on the operations or seeking capital that is more friendly to newer businesses.

Entrepreneurs, particularly those in the supply chain in Europe, the United Kingdom, and indeed the rest of the world, frustrated with the lack of access to traditional financial streams should consider invoice financing. Many may have heard the term before but may be unsure how it actually works. Invoice financing is simple. Upon onboarding, exporters upload the export receivable that they want to be factored into the invoice financing platform, which then pays them cash in as little as 48 hours. They are spared the need of having to wait anywhere from 60 to 90 to 120 days to collect in a traditional payment cycle. They get working capital, which can be used to grow their business beyond the current plateau.

Invoice financing is also friendly for importers. Following a buyer-led approach, they can also upload their suppliers’ export receivables that they wish to be paid. Their trade partner will likewise be paid within 48 hours, and the importer gains a longer runway, anywhere up to 120 days depending on the terms, to pay back the platform. The importer can thus enjoy more working capital today, rather than worry about paying off vendors. As a result, they can also focus on revenue-generating activities that grow the business.

Investors benefit from both importer- and exporter-led invoice financing because they can back individual receivables or groups of receivables. Either situation represents a promising asset class that offers stable returns.

While invoice financing is subject to similar requirements as more traditional forms of financing – it is a financial instrument after all – it is arguably more accessible. To be eligible, importers or exporters need to have a trade history with their corresponding trade partner. They also do not need to be corporate (i.e. which is the preferred lending partner of banks), invoice financing platforms generally work with SMEs and other enterprises. It also does not require any form of collateral, so it is friendly to businesses without significant assets that they are willing to take a loan against. Finally, invoice financing occurs off-the-balance-sheet, so it does not saddle businesses in debt at a time they need positive income statements the most.

For all these reasons, I think invoice financing should not just be looked at as a financial innovation. It is very much a social one as well, opening up access to financial streams to entrepreneurs in the supply chain who may otherwise not have had access. Invoice financing, in short, has innovated how we extend inclusivity.