Catch me if you can: tech savvy fraudsters in high-risk industries and how to combat them


Catch me if you can: tech savvy fraudsters in high-risk industries and how to combat them

Most of us remember the hit movie Catch Me If You Can, starring Tom Hanks and Leonardo DiCaprio, which tells the true story of master check fraudster Frank Abagnale. Much has changed since then, but the tactics fraudsters use remain the same. Just like Abagnale, modern-day organized gangs take advantage of the time it takes for a credit card transaction to clear, but now with the purchasing speed of the internet which allows online payments fraud to take place almost instantaneously. Fortunately for fraud managers, however, counter fraud solutions have become as tech savvy as the criminals themselves.

For many merchants, fraud is often an afterthought until a major attack has taken place. Policies and procedures are then tightened up to prevent fraud and the chargebacks it incurs, or, at the very least, to delay the next attack. Merchants in online high-risk industries cannot afford to take the risk of waiting for an online payments fraud attack to happen simply because the nature and scale of the business they operate in. In industries such as gaming, gambling, digital goods, dating, adult and ticketing, merchants should assume an online payments fraud attack will happen because of the high demand for their products or services on the market and/or their products’ high resale value.

High-Risk Industries 

Each industry is deemed high risk for its own separate reasons. The chargeback risk for gaming often lies in children’s unauthorized use of their parents’ credit card and the parent doesn’t discover it until the credit card statement arrives. Another aspect that made gaming high risk: at a certain point, fraudsters discovered that you could trade items within certain games. Scamming sweatshops using stolen credit cards were quickly set up in various locations around the world. Fake players were then created to tempt bona fide gamers into buying the items instead of trading them by wiring money to the fraudulent player.

The gambling industry is deemed high risk primarily because of the frequent use of stolen credit cards. Gambling addicts will also use stolen credit cards to simply feed their addiction, even though they cannot access the cash they have won. Whatever the reason behind the behavior, criminal acts such as these still constitute online payments fraud.

The ease of reselling digital goods is what makes it a high-risk industry. Any product that is in high demand on the legitimate market will also be in high demand on the black market especially if it is offered at greatly reduced prices. Online travel and ticketing both have a high resale value; anything purchased with a stolen credit card creates the potential for huge profits.

Dating sites are often plagued by criminals who use stolen credit cards to create profiles on their sites with the intention of committing additional crimes. Adult sites can fall victim to what experts call “friendly fraud”. In these cases, a stolen credit card has not been used, but the purchaser alleges he or she did not buy the product or service and claims a credit card refund.

Counter Fraud Solutions

With so much online mass market appeal, counter fraud solutions for these industries must be as tech savvy as their customers, both legitimate and nefarious. Counter fraud solutions that can prevent chargebacks include device fingerprinting and machine learning. Device fingerprinting allows merchants’ websites to create a digital fingerprint for every device that accesses its website. If a transaction is made that seems foreign to the device, that can be an indication of fraud and the transaction is flagged. Machine learning offers the potential to detect fraudulent patterns rapidly by using algorithms. The speed at which machine learning can detect fraudulent behavior greatly surpasses the speed at which humans can recognize fraudulent behavior. Early detection is key to prevention because of the agile nature of fraud; fraudsters will always try to be one step ahead of the game to ensure their online payments fraud attack is successful.

About Huub Sparnaay

I started this company in 1997 as a provider of telecom hardware for large telecom companies worldwide. During the following years, I adjusted the business model to developments in the market. The result is Mi-Pay, a service provider fully focused on delivering payment solutions to large B2C organizations.

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