E-commerce fraud up 131pc on last year


24 Oct 2007

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Online fraudsters have started their Christmas shopping early this year with fraud levels up 131pc on last year. By comparison, retail online trade volumes have increased 88pc on the year.

According to Retail Decisions (ReD), a UK-based online fraud prevention expert, online commerce is proving ideal to time-starved consumers. But unfortunately fraudsters with plenty of time on their hands are seeking out easy prey.

Online fraud incidents have increased 131pc this year.

Fraudsters appear to be snobs when it comes to shopping online and tend to aim for more extravagant purchases than ordinary consumers.

The average online consumer spends €287 online whereas fraudsters tend to spend €755 on average.

What type of products do online fraudsters favour? They are typically the very latest high-value, electronic goods and luxury goods such as mobile phones, luxury handbags and iPods as these tend to be fairly easy to sell on at a good resale value on the black market and on eBay.

The phone of choice for criminals in September was the Samsung U600 — an incredible 46.7pc of all online sales seen by ReD for this item were fraud attempts.

“Retailers cite the iPhone as one of the must-have products for this Christmas and at ReD, our risk analysts will monitor purchasing patterns of this item with an extra level of vigilance,” said Carl Clump, CEO of Retail Decisions.

“Other current popular targets on the top of the fraudsters shopping list we are seeing at the moment are gift cards, the LG Shine Mobile, Nintendo DS Lite Consoles and the 30GB Apple iPod Video,” said Clump.

Why is online crime outpacing the overall rise in transaction growth? There are a number of reasons for this. One of the key factors is that so-called bricks-and-mortar retail shops have become more secure, forcing fraudsters online.

Paradoxically, the successful roll-out of Chip & Pin in 2005 closed down many opportunities for criminals to carry out illegal transactions in the UK high street, forcing them instead to try their luck at card-not-present channels, notably the internet, mail order and telephone order.

At the same time, highly organised gangs share stolen card records and use technology to allow them to generate false consumer details in an automated fashion and then automate the generation of these transactions at web stores.

Another development in criminals’ favour is the increased availability of goods on the internet with short delivery times. This enables fraudsters to acquire a wide range of goods in as quick a time as possible before the e-tailer has the time to check the validity of the transaction.

ReD was able to identify each month which were the most fraudulent originating countries outside of the UK and share these with its retailing clients. In September the top such country was the US, followed by Ireland, Germany, Spain and France.

Similarly, ReD is able to quickly identify the most popular country of issue for fraudulent cards used to attack UK online retailers as well as the extent to which this changes over time. In September 2007, for example, fraudulent non-UK cards were most likely to have been issued in France, followed by the US, Ireland, Norway and Germany.

Retailers are now also able to identify the UK post codes to which fraudulent deliveries are most likely to be sent. For example, SE is the most fraudulent delivery area (this area of London accounts for 5pc of all UK online fraud).

By John Kennedy

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