6 e-commerce cyber fraud challenges in 2022

Financial technology, cryptocurrency and embedded finance options from alternative lenders are changing financial services. As organizations keep up with user digital demands, they are also dealing with an evolving fraud landscape, with online payment fraud losses set to exceed $206 billion between 2021 and 2025, according to Juniper Research. As criminals become more sophisticated and adopt these technologies, companies and chief security officers (CSOs) must also adapt and anticipate these developments.

These six fraud and cybersecurity predictions can help security leaders prepare for the evolving threat landscape.

1) A new wave of deepfake synthetic identity fraud

2021 saw a surge in deepfake identity fraud, which will continue in 2022. The development of artificial intelligence (AI) to impersonate user voices and faces is becoming more prevalent, making it challenging for businesses to authenticate identities.

With recent advances in deepfake technology, fraudsters can leverage compromised identity data to bypass verification controls, and create new profiles with documents, facial images, and voice cloning to bypass identity authentication requirements for secure exchanges like government benefits sign ups, particularly during enrollment and authentication.

Detection and prevention of deepfake identity fraud involves applying a layered strategy of technical defenses. Requiring identity data or documents in isolation is insufficient; organizations need to capture digital and behavioral data, then use AI and machine learning to analyze interactions and spot fraud.

2) Fraud as a Service is just a click away

Fraudsters are increasingly using automated bots to impersonate businesses and socially engineer their users. As fraud controls become more effective at thwarting traditional cyberattacks, fraudsters see opportunities to capitalize on advances in voice bots.

In 2022, a large portion of fraudulent transactions will be submitted by legitimate users who are being socially engineered to provide data and use their own devices to submit what they believe are legitimate transactions. Globally, banks are witnessing this trend as fraudsters can purchase bots to contact users, impersonate their banks, retrieve passwords and forward those codes to fraudsters. Fraudsters will likely expand operations to impersonate other businesses, including retailers and government organizations.

3) Real-time payments = faster fraud

Faster money can mean faster fraud. Juniper Research stated real-time payments (RTP) increased by 41% between 2019 and 2020 and will rise by 23% between 2020 and 2025. From mobile payments to Buy Now, Pay Later practices, RTPs have provided ample opportunity for fraudsters to quickly monetize and cash-out — converting money to other currency like crypto and then laundering funds through multiple fake accounts.

Crypto’s lack of regulation makes it attractive for fraudulent activity because attackers remain anonymous and can funnel funds in seconds. RTP’s speed presents unique challenges to businesses because they often can’t be revoked or easily traced. Demand for RTP is growing, so regulations need to be set and organizations must authenticate identities and transactions across channels in seconds with these faster payment methods.

4) Buy Now, Pay Never

Buy Now, Pay Later practices have exploded, with alternative lenders across retail. But businesses offering tailored financial products based on user data can leave the door open to criminals. According to Aite-Novarica Group, financial technologies have an average fraud rate of around 0.30%, which is double that of credit cards.

Without the right identity and fraud protections across their websites and apps, financial technology organizations not only risk fraud losses, but a damaged brand and reputation. And without quick, comprehensive fraud reporting back to the businesses they serve, they also risk enabling more downstream fraud attacks.

5) Supply chain issues expand marketplace scams

Security leaders expect to see more issues with marketplace fraud as supply chain issues and inflation persist through 2022. Where supply gaps exist, fraudsters will meet the pent-up demand with non-existent products, scamming users to part with money for nothing in return.

It’s easy to set up a fake business with positive reviews. And because consumers cannot verify the business’ authenticity, they lose money and then try to recoup funds from their financial provider. This is another area where Buy Now, Pay Later providers will bear responsibility for considerable retail fraud in 2022.

6) Digital identity’s convergence of identity verification and fraud detection

Password-free experiences led by smartphones and real-time payments have resulted in a seamless, uninterrupted user journey. But central to this is identity authentication. As identity verification and fraud detection converge, how can a secure approach to digital identity be adopted?

The European Digital Identity scheme shows governments are beginning to move in this direction, but these are first steps. As fraudsters continue to target authentication and onboarding, the bid to create secure, reusable digital identities to enable seamless commerce and mitigate criminal activity becomes critical. This is a concept that may play a big role in fraud prevention in 2022 and beyond.