Forter, a fraud prevention company, said that online fraud attacks grew 8.9% in 2016 and early 2017 compared to 2015, a reduction from the 2015 increase when significant fraud moved from point of sale (POS) to online. The report was conducted in conjunction with the Merchant Risk Council.
Following the October 2015 adoption of EMV (microchip cards) in the United States, Forter's fraud research team said it was not surprised to have observed a rise in the amount of domestic online fraud attacks. "Since domestic US fraudsters were most adversely affected by not being able to copy physical cards as easily, it makes sense that these criminals have shifted online, boosting domestic CNP (card not present) fraud," the study said.
The international fraud attack rate decreased by 13% as compared to 2015, and Forter's researchers attribute this decrease to a growth in genuine international orders rather than a decrease in fraud, and said this may parallel the increasing value many merchants are seeing in the international market. And despite the 13% decrease, international orders were found to be 62.4% riskier than domestic ones in 2016.
According to Forter, fraudsters have shifted from "Merchant ATO" (i.e. breaking into accounts on the merchant's website, in order to pass as returning customers) to "online payment ATO" (i.e. breaking into accounts of online payment services, such as PayPal, Apple Pay, Amazon Payments, etc.). For this reason, the study said that "Merchant ATO", which had shot up during 2015, decreased during 2016. However, researchers said this was a shift rather than a true decrease: The 2016 Fraud Attack Index shows a 131% uptick in the attempts of Account Takeover against online payments accounts.
"The most notable growth in fraud attack rate is within the apparel industry. Comparing the rate in Q4 2016 to that of Q4 2015 shows a significant increase of 69%," said Michael Reitblat, CEO of Forter. "This may be related to the new fraudsters who've joined the online criminal community following EMV adoption in the US and are perhaps sticking to a vertical they understand. It may also reflect the increased comfort of genuine shoppers with the idea of buying fashion items online and returning as necessary."
The frequency of fraud attacks on key retail verticals includes:
- Apparel - 69.9% increase
- Luxury - 8.4% decrease
- Digital Goods - 22.6% decrease
- Electronics - 1.8% decrease
- Travel & Hospitality - 33% decrease
- Food and Beverages - 49.8% increase