E-commerce Security in the Age of Synthetic Identity Fraud: Effective Methods for Detection and Mitigation.
Synthetic identity fraud has become a significant challenge for businesses and individuals alike, with the Federal Reserve identifying it as the fastest-growing type of financial crime in the United States. As criminals become more sophisticated and evolve their methods, it is crucial for businesses to adopt innovative solutions to protect themselves and their customers. This article will explore the intricacies of synthetic identity fraud and how advanced technology can help detect and prevent such fraud, including the emerging threat of synthetic shopper fraud.
Understanding Synthetic Identity Fraud
Synthetic identity fraud occurs when criminals create a fake identity by combining fabricated or synthetic credentials that are not associated with a real person. The process typically involves obtaining the name and Social Security number of a legitimate person, opening a legitimate but untraceable address (usually a PO Box), and combining the identity and address to create a new “synthetic” persona for use in credit card applications. Over time, the synthetic persona builds good credit, increasing card limits before the fraudster maxes out all credit cards without paying any bills, and ultimately discontinued the use of the synthetic persona.
The Emergence of Synthetic Shopper Fraud
A new form of synthetic identity fraud, known as synthetic shopper fraud, is on the rise. In this type of fraud, criminals use stolen payment cards to create online shopper profiles with e-commerce retailers.
These criminals employ bot scripts to automate the creation of synthetic shopper profiles,
which allows them to outsmart fraud transaction risk and detection controls.
The Impact on Businesses
Synthetic identity fraud has serious consequences for businesses. It is projected to cost businesses nearly $2.5 billion in 2022, and research suggests that number could double to nearly $5 billion by 2024. To combat this growing problem, e-commerce stores must implement innovative solutions that can address and prevent synthetic identity fraud while maintaining a frictionless customer experience.
An Effective Solution: Anomaly Detection and User Behavior Analysis
One promising approach to tackling synthetic identity fraud is to analyze user behavior in online stores and detect anomalies that might indicate fraudulent activities. For example, a large group of users making the same type of purchase of one or multiple items can be indicative of synthetic identity fraud. By employing sophisticated velocity rules and a clear understanding of user behavior, businesses can effectively identify the connection between accounts with synthetic identities and take preventive measures. As the world of e-commerce continues to grow, businesses must adapt to new threats and develop strategies to protect themselves and their customers from fraudulent activities.
Companies like FUGU offer reliable solutions that focus on anomaly detection and user behavior analysis, providing a practical way to combat the growing issue of synthetic identity fraud
By staying vigilant and embracing innovative technologies, businesses can ensure a secure and frictionless shopping experience for their customers.