If you think you’re most likely to fall victim to online fraud on heavy shopping days like Singles’ Day and Black Friday, think again.
A new global study has shown that while online fraud does increase in late December, fraudsters typically strike at times when people aren’t shopping such as on Christmas Day or late at night.
The study was conducted by Silicon Valley-based technology platform Stripe, which examined transaction data over several years across hundreds of thousands of its customers across 25 countries including Singapore.
In its report Online Fraud Trends and Behavior (December 2017), Stripe found that online fraud follow this “stark reversed pattern” and likely reflects how fraudsters may be operating remotely globally, conducting their activities when their victims are asleep.
With brick-and-mortar shopping made safer due to chip-enable credit cards, online stores are at a higher risk and usually end up paying for the associated costs of fraud too.
On average, every $1 of fraudulent orders cost an online business an additional $2.62 and a mobile store $3.34.
Get inside the mind of a fraudster and you’ll find some common behavioural patterns.
For instance, fraudsters prefer products that don’t need to be delivered, can be delivered to locations like public buildings or parks without raising any red flags, and can be obtained quickly before transactions are invalidate, said the report.
This explains the prevalence of fraud among on-demand services, as well as low-end consumer goods.
Fraudulent transactions tend to be small – which is surprising since fraudsters aren’t paying for the products they buy – but in some countries such as Singapore, such transactions are significantly larger than normal transactions.
The report said that fraud rates are lower for recurring payments and this is most likely because such transactions involve a subscription service or extended relationship that has been verified by businesses over time.
Another habit of fraudsters is that they often make repeat purchases on the same stolen card, and these are usually made much more quickly than normal transactions.
Globally, more than 40% of compromised cards are charged for more than one fraudulent transaction, said the report.
Research and consultancy firm 451 Research’s principal analyst Mr Jordan McKee said that it is crucial for online businesses to have robust fraud measures in place.
He said: “Because online fraud is highly complex and increasingly global, merchants should consider outsourcing fraud tooling to trusted third-party providers that have access to large and robust data sources.”
“The most effective providers leverage global data sets from hundreds of thousands of other businesses to train their machine learning algorithms and identify even subtle fraud patterns.”