The Simility Blog

Online Marketplaces: The Hotbed For Fraud
Vanita Pandey
Vanita Pandey
August 28, 2018

Online marketplaces need intelligent fraud prevention solutions to fight marketplace fraud in real-time

Disruptive online marketplaces such as Amazon, Airbnb, eBay, Uber, and the likes, have changed the way consumers shop. They have raised the bar for consumer shopping experience, enabling instant, friction-free transactions through multiple payment options and devices. However, the same marketplaces can be an attractive target for cyber criminals who are reaping ‘business profits’ of $1.5 trillion a year, as estimated by a Surrey University criminologist.

With customers demanding speedier same-day deliveries, online marketplaces have minimal time in hand to spot and block fraudulent transactions. Businesses must speed up and act real-time for such time-sensitive processes.

The Business of Fraud

The dark web is buzzing with criminal activity. The modus operandi fraudsters usually follow in an online marketplace is to clone a genuine seller’s account with fake details; and use it to con legitimate buyers into buying something they will never receive. Using online marketplaces, fraudsters sell expensive items to their clients at significantly discounted prices. They steal the credit card details that the customers use for payments. These stolen credit card numbers are then used to launder money online.

Another method fraudsters employ is to create multiple fake buyer and seller accounts. The fake buyers then pay fake sellers for non-existent goods or services through stolen credit card numbers. These stolen identities are used to launder money online under the guise of online purchases until the fraud is detected and the cards are blocked.

Marketplace Fraud Is Now Child’s Play

There is a full-fledged ecosystem that fraudsters use for easy access to tools and data they need for their criminal activities. Specialized platforms, selling such tools, are thriving. It is easy to buy off-the-shelf tools and put together a criminal activity toolkit. Or, if interested in stolen credit card numbers, ‘aspiring’ cyber criminals can buy a card (stolen of course!) at $1.

Marketplace fraud is not just restricted to ‘qualified’ criminals. Regular people are using online marketplaces for fraud, too. In a recent incident, reported from the developing e-commerce landscape of Africa, a victim reported online fraud on his card. The investigations led to prompt arrest of the culprit, who turned out to be the victim’s girlfriend. She had used the stolen card details to buy an iPhone 8 and an iPhoneX from an online marketplace.

This incident underscores the threats businesses are up against. It is worth a thought that if common people from developing e-commerce societies can use stolen credit card numbers for marketplace fraud, the losses that professional fraudsters inflict, can be colossal.

Expert fraudsters are using a more sophisticated version of CNP fraud – account takeover activity – using stolen identities to access accounts, and siphon-off money. According to Europol, the 95 suspected fraudsters apprehended in June this year, reportedly effected losses of over eight million Euros through 20,000 fraudulent transactions with stolen credit cards numbers.

A Flourishing Fraud Community

One reason marketplace fraud is evolving and spreading at a breath-taking pace, is that the fraud community is professional and armed with sophisticated tools and techniques. They are continually upgrading ‘skills’ and sharing knowledge in the community. Add to this the inflow of ‘aspiring’ criminals, and we have a growing criminal community, ready with real threats to businesses. On the other hand, businesses are sorely lagging in preventing fraud, providing fraudsters with a wide base to flourish.

Playing Catch-up

To fight marketplace fraud, businesses are making efforts. However, so far, it has just been a catch-up game against a far more sophisticated and professional opponent. Often, business responses to such fraudulent activities are reactive that allow fraudsters the crucial time to escape. For instance, one of the top credit bureaus in the US, took almost six months to realize its data had been stolen. Similarly, one of UK’s leading entertainment ticketing service, faced a data breach that went undetected for five months.

Need For Speed

With customers demanding speedier same-day deliveries, online marketplaces have minimal time in hand to spot and block fraudulent transactions. Businesses must speed up and act real-time for such time-sensitive processes. This is because risks associated with marketplace fraud through stolen identities are not just tangible in the form of financial losses. The intangible losses such as damage to reputation and customer trust, are long-term and much more detrimental. Therefore, businesses need intelligent fraud prevention solutions that use best-in-class technology to self-optimize and future proof marketplace fraud prevention efforts.

Prevent Fraud With Simility

Simility’s fraud prevention solutions track a range of behavioral patterns of fraudsters in the online marketplaces. This empowers businesses to identify and prevent potential fraud in real-time.

Simility’s Adaptive Decisioning Platform is powering fraud prevention efforts of some of the largest online marketplaces in the world. Using Simility’s solution, these market leaders are now able to automatically spot fraudulent transactions and block them before chargebacks are incurred. This enables them to not only prevent fraud losses, but also reduce the time and money spent on manual reviews and attempts to recover funds.

To learn how Simility’s automated fraud prevention solution can help fortify your online marketplace and fight marketplace fraud, contact us today.