The Case of the Criminal Magpie – Why Jewelry is Seeing an Online Fraud Spike

by Michael Reitblat 0

It’s never been easier to be an online criminal. A well-developed ecosystem means that both the raw material of stolen data and the tools of programs designed to enable fast fraud are easily accessible. Online forums and guides make learning the tricks of the trade easy and automation has given fraudsters what marketing automation has given marketers – speed, efficiency and the ability to personalize.

The growth in online fraud can be seen across industries, segments and products, but one area with a notable spike is luxury goods like jewelry. According to the Global Fraud Attack Index™, between Q1 and Q4 of 2015 the fraud attack rate for luxury goods doubled. In terms of potential cost, $8.62 out of every $100 are now at risk for luxury goods. Only digital goods are more at risk. So what makes them so attractive to online criminals, and how can retailers protect against it without compromising customer experience – and sales?

Why Fraudsters Love Jewelry

While we have seen cases where fraudsters have been aiming to buy sparkly treats for themselves and even as gifts, this isn’t the typical scenario.

Fraudsters love jewelry because it’s valuable and easy to resell – the ideal combination for an online criminal who’s looking to maximize their ROI. Make no mistake, the majority of modern fraudsters have a businesslike approach to theft. They aim to spend the minimal amount of effort for the maximum amount of profit. That attitude makes jewelry an appealing target.

The challenge for online merchants is to successfully block the fraudsters without detracting from the ideal customer experience that belongs to high end purchases.

Fraudsters are More Sophisticated

Beyond the sheer rise in attacks, the other trend that is causing concern for online jewelry merchants is the increased sophistication of the attacks themselves and the tools that are available to those perpetrating them.

One problem is automation – the use of botnets shot up in 2015 and continues to be popular in 2016 as well, allowing fraudsters to try multiple avenues of attack at once. This supports another growing trend, ATO (account takeover) where criminals gain access to an account or accounts and use the account and its associated details to commit fraud. The fact that this customer has made many good purchases in the past won’t help you – because it’s not really them at the keyboard.

Fraudsters Like to Get Their Money’s Worth
Time is money, for an online criminal as much as anyone else. If they’re going to invest significant time in a particular theft, they expect it to pay off.

That means that particularly valuable targets, like jewelry, are especially likely to be of interest to experienced fraudsters with understanding of and access to sophisticated fraud tools and techniques. It’s worth their while to take their time over the crime, considering the potential profit. Again, it’s all about ROI.

Online jewelry merchants therefore face more than their fair share of the smartest and sneakiest fraudsters. There are two main types of sophistication relevant here: complex identity fraud, and technical ability.

Both are hard to detect, for different reasons – identity fraud because the fraudster often knowns so much about the victim, having done research including social engineering to get to that point, and technical ability because creative hackers are always coming up with something new.

It is important that merchants’ antifraud is continually updated, and drawing information from as many sources as possible. Fraudsters come up with new techniques all the time, so updating once a month is going to leave your site behind the latest developments and liable to letting through bad orders while turning away good ones.

Frictionless Fraud Prevention

Defending against clever fraudsters doesn’t have to mean compromising customer experience. Online jewelry merchants can’t afford to let fraud prevention add delay, frustration or friction to their shopping experience. When your customers are buying jewelry, the process should be enjoyable.

The latest fraud fighting technology means that highly effective and continually updated fraud prevention is often also the most consumer-centric. Full automation, which has only been possible for the last few years, means that fraud prevention can be invisible to your genuine customers, who will never even know they were analyzed. Losing sales when buyers become annoyed, give up or are turned away mistakenly can become a thing of the past.

The manual reviews and demands for extra information which characterized the older systems have been replaced by real-time decisions which make checkout seamless and add no delay afterwards. Some vendors even offer a chargeback guarantee to protect the retailer in cases of successful fraud.

The fraudsters are making the most of technological advances to push their agenda. Retailers can do the same to protect themselves, their revenues and their customers’ experiences on their site.

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