Roberto Valerio, CEO of fraud prevention experts Risk Ident, shares his insights on the issues set to hit online businesses in 2016 and explains how organisations can combat increasingly sophisticated fraudsters
As the curtain closes on 2015, online businesses are reflecting on a year that saw a number of high-profile breaches sweep the media, while fraud managers were working behind the scenes to stop ruthless fraudsters who have no qualms about the victims of their actions or where in the world they are.
Online fraud was included in the UK Office for National Statistics (ONS) figures for the first time in 2015, revealing that an estimated 5.1 million online fraud incidents occurred in England and Wales over a one year period.
As we move into 2016, Roberto Valerio, CEO of fraud prevention experts Risk Ident, explains the threats online businesses can expect to encounter in 2016 and how best to prepare for another year of fighting fraudsters:
- Online transactions will continue to rise. So will fraudulent attempts.
This is not surprising. Online retail is estimated to be valued at £185.44 bn in the UK alone in 2016. It’s convenient but customers expect security. However, the simple fact means with more money flowing online, the internet becomes more attractive to fraudsters.
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- Increasing sophistication of fraudsters
Fraudsters are becoming more sophisticated and will trawl all available information for facts about a person, whether via social media or cunning phishing techniques that catch users unaware. Once criminals have harvested data they sell it on the black market online, enabling fraudsters to obtain information to trick or impersonate users for financial gain.
- A new wave of post-EMV fraud online
The US liability shift deadline for adopting EMV, better known as Chip and PIN, was in October 2015 but many US retailers and consumers are still to fully adopt the technology. This means the imminent rush of fraudsters from card-present transactions to card-not-present (online) transactions is still to materialise. This will come and fraudsters will hit European merchants and customers hard as they chase the rewards of online payments.
- The death of legacy support systems
Outdated software, whether on the front end or back end, makes merchants vulnerable to fraudsters who will have long since discovered the best ways to bypass security methods. Threats evolve constantly and it’s important that technology can learn and evolve to deal with these changing risks. Worryingly, over half of merchants only adapt their fraud rules twice a year or less – this makes them susceptible to the latest threats.
- Artificial intelligence & Machine Learning will come to the fore
Artificial intelligence is a vital part of the fight against fraud to help handle the vast quantity of transactions going through online systems. Machine learning technology, supported by data science, helps to intelligent link transactions, giving the clearest possible picture of an organisation’s online fraud problem, which can then be interpreted and prevented by empowered fraud managers.
Businesses can prepare themselves to tackle these fraud threats by combining the best technology with human knowledge effectively.
For example, device fingerprinting for identification helps to identify the source, rather than the user, helping to root out the fraudster. Analysing all sources of customer data in combination with each other also helps businesses to avoid rejecting or deterring genuine customers, while identifying and stopping fraudulent transactions. Businesses should use machine learning technologies to help identify a combination of suspicious factors rather than depending on rules alone, as well as utilising empowered, knowledgeable fraud managers to help flag suspicious activity provides the best defence against fraud.
Fraudsters are ready and waiting to take advantage weakness in online companies’ fraud prevention systems in 2016. Online merchants need to make sure they can cope with extra traffic and abnormal behaviours or risk turning the biggest sales day of the year into the biggest fraud cost of the year.