Online retail loyalty programs frequently become targets for fraudulent activities on the internet
Retail fraud is a growing concern for businesses, with a recent report by Forter identifying loyalty programs as a vulnerable area for retailer fraud. The report suggests that as consumers' expectations grow, retailers are placing fewer security measures on loyalty points, making them attractive to cybercriminals.
The beauty industry, however, has seen a significant decrease in fraud attacks, with a 36% decrease reported by the Forter Fraud Attack Index. This decrease could be due to the industry becoming more saturated, leading to increased competition and heightened security measures.
On the other hand, the retail and e-commerce sectors have experienced a significant increase in fraud cases, with an average rise of about 30% in fraudulent transactions, according to the Forter Fraud Attack Index 2021. Loyalty programs have experienced a growth of 89% as a method for fraud attacks.
Customer identity manipulation and omnichannel shopping methods have also seen a rise in fraud attacks. Customer identity manipulation has experienced a 30% growth, while omnichannel shopping methods have seen a 23% increase. This increase in fraud attacks through omnichannel shopping methods could be due to the ease of abuse in in-store returns policies, with fraudsters taking advantage of easy pickup options.
Returns abuse is another significant issue, costing retailers in the United States more than $17 billion annually. Criminals can buy fashion merchandise and resell the items for near retail price to shoppers seeking a deal.
Card-not-present fraud is another concern, with estimates predicting it to increase to $130 billion by 2023. The holiday season is identified as a prime time for retail fraud, according to previous research.
Interestingly, the home and garden industry has seen a 50% decrease in fraud attacks, while online marketplaces have seen a 24% decrease. The report does not provide information on the overall trend of fraud attacks across all industries, but it does suggest that fraud attacks in the beauty industry could continue to decrease as that market becomes more saturated.
Online apparel and accessory companies, however, have experienced a 44% increase in fraud attacks year-over-year, according to the Forter Fraud Attack Index. This increase could be due to the growing popularity of online shopping for clothing and accessories, making it a prime target for fraudsters.
Each dollar of fraud costs retailers $3.13, an increase from $2.40 in 2016, according to a LexisNexis Risk Solutions report. As retail fraud continues to rise, it is crucial for businesses to implement robust security measures to protect their customers and their bottom line.
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