Fraud technologies and strategies are constantly evolving. Below are some of the most prevalent types of fraud that organizations and individuals face today:
New Account Fraud / Synthetic Identity Fraud
New account fraud involves a fraudster creating an account using a real person’s credentials and identity. In synthetic identity fraud, the fraudster uses personally identifiable information (PII) from one or more real individuals to fabricate and support a new fake online persona. This type of fraud is particularly insidious as it combines elements of real identities to create a credible fake identity.
In 2022, 46% of organizations reported encountering synthetic identity fraud, and this number is expected to rise. Moreover, 60% of businesses identified the presence of bots and fake users during their onboarding processes, highlighting the pervasive nature of this issue. The impact of synthetic identity fraud extends beyond financial losses, affecting consumer trust and organizational reputation.
Account Takeover (ATO)
Account Takeover (ATO) occurs when fraudsters gain access to the login credentials of a legitimate existing account, allowing them to bypass security measures designed to prevent the creation of new fraudulent accounts. This form of fraud is increasingly common. According to the nonprofit Identity Theft Resource Center, 61% of reported identity misuse cases last year were due to ATO. Additionally, some experts estimate that 22% of U.S. adults have been victims of ATO, suffering an average financial loss of $12,000 per incident.
The rising incidence of ATO highlights the critical need for robust security measures, such as multi-factor authentication, to protect personal and organizational accounts from unauthorized access and exploitation.
Promotion and Discount Abuse
Promotional offers and discounts, such as signup and referral bonuses, purchase discounts, and loyalty rewards, are effective marketing tools to drive signups and purchases. These incentives can entice visitors to return to an abandoned online shopping cart or visit a physical store to redeem an offer.
However, promotions and discounts are also susceptible to abuse. Individuals may create multiple accounts to repeatedly take advantage of promotional offers, or automated attacks can generate numerous accounts that appear eligible for the promotions. This type of abuse is widespread, with 73% of retailers reporting that they experienced promotion abuse in the previous twelve months.
Promotion and discount abuse not only results in financial losses but also skews marketing data and diminishes the effectiveness of promotional strategies. Retailers must implement measures to detect and prevent such abuse to protect their promotional investments and maintain the integrity of their marketing efforts.
Conclusion
As fraud tactics continue to evolve, it is essential for organizations to stay vigilant and adopt advanced security measures to combat these threats. By understanding and addressing the various forms of fraud, businesses can better protect themselves and their customers from the detrimental effects of fraudulent activities.
