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The Rising Cost of Fraud
An overview of fraud
An overview of fraud
The impact of fraud on businesses
The impact of fraud on businesses
How fraud is typically committed
How fraud is typically committed
Methods for combating fraud
Methods for combating fraud
Strategies to avoid new account fraud
Strategies to avoid new account fraud
An overview of fraud
From nuisance to massive liability
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The impact of fraud on businesses
More than just an inconvenience
Fraud generated by automated bots and real-life bad actors and fraudsters remains a significant threat for nearly two-thirds of midsized to large e-commerce companies. And fraud costs, as a percentage of annual revenue, also are on the rise. Not only can this impact your cost of acquisition by having to pay for fraudulent users in your scalable SaaS systems, but it can lower the customer lifetime value by violating mutual trust between customers and companies.
Here’s what you need to know:
Fraud costs rise
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As you can see, without having a plan in place to mitigate the risk of fraud, you can lose millions of dollars.
Let’s explore what types of fraud companies are facing today.
Data breaches
Account takeovers and attacks
SMS Pumping
International toll fraud
Transaction fraud
Login credential fraud
Account recovery fraud
So how is identity proofing typically done?
Email: Simple but not always secure
A vast majority of businesses identify online accounts by user email addresses. This practice gained a foothold early on since an email address is unique to an individual, customers rarely forget their own email address, and email is the best way to contact the account holder. However, it’s almost impossible to determine if an email is fraudulent or not.
Biometrics promised trustworthy identity confirmation to correctly determine who is using a device by capturing, storing, and comparing physical attributes—like fingerprints or iris scans. But in practice, capturing and storing biometric data doesn’t make it impervious to
Multiple data points: Too much too soon?
Another method of verifying that a real person (not a bot) is behind your signup or password reset request is to ask for numerous pieces of personal information. This step dramatically improves the chances that new account signups are from real people, but it also introduces user friction into the process. This approach is not suitable for every scenario. Providing this data to open a bank account makes sense, but might be overkill when signing up for a ride-sharing app.
SMS: Useful but limited
Most frequently used to provide two-factor authentication (2FA) and one-time passwords (OTP), it allows users to verify their identity from information sent to them in a text message on their mobile phone. The simple, straight-forward nature is why it works so well for users and organizations leveraging the technology. It, does however, leave an organization open for man-in-the-middle schemes, SS7 attacks, and doesn’t ward against SIM swaps. SMS wasn’t originally designed for authentication originally and verification technologies need to be in place to mitigate fraud.
Use methods that simplify user flows and reduce friction
When a customer wants to open a new account with your business, the last thing you want to do is make that experience cumbersome. At the same time, you want to cultivate their confidence in your commitment to keep their information safe. So, how do you build a frictionless experience while garnering trust?
Let’s walk through the steps to avoid new account fraud:
- Step 1: Remove unnecessary activation steps - Boil your onboarding process down to the minimum viable checkpoints to simplify the user experience.
- Step 2: Meet customers where they are - Use the customer’s preferred channels to verify their identity.
- Step 3: Passively confirm user identities - Confirm their presented identity with phone intelligence data to ensure a match
- Step 4: Prioritize reliable deliverability - Choose the right vendor to help execute verification strategies to avoid customer frustration.
QUICK TIP
Phone numbers reveal useful information that can be used to verify the authenticity of an account.
First, phone numbers are identified as either a landline, mobile, or Voice over Internet Protocol (VoIP). Second, phone numbers are associated with countries of origin. Lastly, phone numbers can be tied back to telecommunications carriers. These attributes help businesses filter out potentially fraudulent traffic from specific geographies while also identifying phone numbers associated with real devices owned by real people. Wow!
Step 1: Re-authenticate the user
Step 2: Enable step-up validation
Step 3: Leverage preferred channels, securely
STEP-UP SECURITY: Email verification vs. phone verification
Unlike email, it’s hard work to fake a phone number. That’s because phone numbers are harder to obtain and are typically unique to an individual. And while its reasonably simple to automatically generate thousands of email addresses to create bogus accounts, doing the same with phone numbers is difficult, time-consuming, and expensive—all things cybercriminals look to avoid.
Follow these 10 steps to avoid fraud
Create seamless points of validation. Use friction-free authentication that relies on deterministic connections to mobile carriers where available with fallback alternatives such as push notifications, SMS, or voice.
Ensure accuracy. Get the full phone number, including the country code, and make sure the national formatting protocol is correct. This is important, as phone numbers are formatted differently worldwide.
Simplify for mobile. On mobile platforms, where the device itself might have a phone number directly associated with it, use push verification to keep customers in your app.
Bolster contact center security. Fraudsters commit call center fraud by contacting an organization’s call center pretending to be someone they’re not. Having agents ask the caller to respond to a phone number verification process before continuing with a conversation will help stop many instances of fraud in their tracks.
Protect transactions. Block financial accounts opened with an email address/password pair from making withdrawals until a user’s identity is verified by phone number. This presents the account owner with a clear trade-off: provide a phone number, and you can access your money.
Build strategies to fight toll fraud. IRSF attacks are difficult to detect before calls wrap up, and by then, the damage is already done. Unfortunately, there is no silver bullet for toll fraud. The best prevention strategy is a combination of measures to limit a fraudster’s access to your calling capability.
Silent Network Authentication
Fraud Guard
Ultimately, enhancing authentication and fraud prevention solutions is really as easy as finding the right partners with the right tools.
Curious about how much money is at risk in your organization?
Not looking for a Fraud calculator? No problem. Here are a few other resources you might find helpful: