According to TransUnion’s latest analysis of global changes in consumer behavior and online fraud trends, it appears that fraudsters have actually been targeting businesses less than early on in the pandemic — but digital COVID-19 schemes against consumers are still on the rise.
That said, TransUnion’s consumer hardship report also shows that certain industries are still seeing increases in specific types of fraud, particularly when comparing phase 1 of the pandemic (March 11 - May 18) with phase 2 (May 19 - July 25). The travel industry, for instance, has seen a 47% increase in credit card fraud, the logistics industry has seen a 27% rise in shipping fraud, and ghost broking fraud has gone up 8% in the insurance industry.
So why is it that other industries are seeing the significant decrease?
“Telecommunications, e-commerce and financial services companies – all industries that have fared relatively well during the pandemic – were targeted with the most digital fraud early in the pandemic but are now among the least targeted,” shared Melissa Gaddis, senior director of customer success, Global Fraud Solutions at TransUnion, in our recent press release. “This shows us that fraudsters initially targeted the hottest industries with the most money to be had early in the pandemic in order to hide behind the rush of transactions but have now made an obvious shift.
Of course, even with COVID-19-related fraud on the rise in some industries and declining in others, combating it remains an ongoing challenge across the board — making it critical for all businesses to know how to protect themselves and their consumers.
Defining and defending against COVID-19-related fraud
As mentioned above, schemes like credit card fraud, shipping fraud and ghost broking fraud are increasing in certain industries. We’ve outlined what these methods of fraudulent entail, and what kinds of solutions businesses should consider implementing in order to mitigate the associated risks.
- Credit card fraud was already leading to significant losses for banks, consumers and businesses year over year before COVID-19, but increases in online transaction volume since the start of the pandemic came with similar rises in fraudulent activity. The most common form of credit card fraud is Card-Not-Present (CNP) fraud, which involves fraudsters obtaining stolen credit card information (likely from data dumps or skimming) in order to initiate unassuming monthly payments or buying gift cards for larger purchases. This can result in expensive chargebacks and loss of revenue for businesses. Fortunately, the businesses facilitating these online transactions can implement a variety of authentication tools to ensure that the cardholder is legitimate. For instance, TransUnion’s Multifactor Authentication simply extends the authentication capabilities that already exist in mobile phones for consumer verification that’s secure and familiar for users, while Device-Based Authentication augments passwords by recognizing devices, resulting in transparent, device-based two-factor authentication.
- Shipping fraud had already been increasing dramatically due to the growing adoption of e-commerce, with TransUnion seeing a 391% increase from 2018 to 2019. Since the pandemic it has remained a top type of fraud, with many consumers preferring to make purchases online to avoid shopping in stores. Shipping fraud occurs when cybercriminals take over a consumer account, but intercept and redirect packages at the carrier rather than changing the shipping address outright, so as to avoid detection. Logistics and e-commerce companies can combat shipping fraud by adding Device Risk checks at checkout, or adding push authorizations for items that are high-value or commonly targeted for theft.
- Ghost broking fraud is also on the rise as consumers impacted by COVID-19 seek out discounted policies from insurance agencies. Ghost brokers are in the business of selling fake or defrauded insurance policies to individuals, for what appear to be very low premiums. According to the Insurance Fraud Bureau, the industry is currently “seeing an increasing level of ghost broker activity and clearly, as recession bites and people are looking to save money, it’s an opportune market for ghost brokers who can actively advertise their wares.”1 At TransUnion, we recommend combining powerful fraud prevention solutions like Device Risk and Identity Verification to distinguish good consumers from fraudsters in order to prevent insurance fraud like ghost broking.
To find out more about the impact COVID-19 is currently having on businesses and consumers, view TransUnion’s consumer hardship reports and read our latest press release that covers its findings around fraud.
Insurance Times, August 2020