e-Commerce sites under siege from 'digital' fraudsters

Criminal networks are increasingly using digital strategies to defraud online retailers in the US, according to commerce protection specialist Signifyd.

Organised networks are adopting strategies like coordinated bot attacks and automated social engineering to make off with goods using fraudulent orders, with the modus operandi hitting the headlines last year when a Southeast Asian ring stole an estimated $600m in high-end electronics and other goods.

Bot attacks – for example to pressure test existing consumer accounts through card-stuffing campaigns – increased by 71 per cent last year, and criminals also increasingly used automated software programmes to trigger email and SMS requests for account passwords and other credentials associated with breached accounts.

The big players are meanwhile experiencing attacks from their regular customer base as well, who are "becoming more brazen in breaking the rules and even the law to score free products," says Signifyd's latest report.

For example, one-quarter of North American consumers surveyed by Signifyd admitted they had requested a refund from a retailer solely for the purpose of keeping the product and their money.

"Rising prices, heightened expectations and a tough economy have combined to knock consumers' moral compasses out of kilter," it says. "False claims about credit card charges, fulfilment and product quality, along with return fraud and abuse, are squeezing retailers' margins."

The total cost of fraud is becoming clearer and more painful, says the report. For example, a Signifyd analysis found that every $100 in fraudulent orders results in $207 in tangible losses (see image below for breakdown).

Moreover, fear of fraud means that almost two-thirds (73 per cent) of transactions rejected by retailers as potentially fraudulent were actually legitimate, adding to the burden on e-commerce sites. The report estimates that merchants turned away a whopping $24 billion in good orders last year.

Apparel and luggage, luxury goods, home goods and décor, collectibles and leisure an outdoor goods saw fraud levels increase last year, with declines in alcohol, tobacco and cannabis, grocery and household , beauty/cosmetics, general merchandise and business supply categories.