Digital fraud focuses on younger consumers

Digital fraud focuses on younger consumers

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The abrupt shutdown of retail a year ago led to a rise of digital shopping — and fraud. And the most tech-savvy consumers may be the most vulnerable.

In the last 12 months, fraud attempts in digital channels against businesses worldwide increased 46%, according to a new TransUnion study. On the consumer side, 36% of users said they were targeted by digital fraud related to COVID-19 in the last three months, versus 29% who said so approximately a year ago, before the virus spread around the world. TransUnion based its findings on a study of billions of global transactions flowing through its fraud-analysis screening tools.

Younger consumers — typically considered digital natives — were more likely than retirees to be vulnerable to scams during the pandemic, according to new research from TransUnion.

Among U.S.-based Gen Z consumers born between 1995 and 2002, 53% experienced digital fraud attempts, while 40% of U.S. millennials born between 1980 and 1994 were hit by digital fraud, TransUnion said.

“Ordinarily younger generations tend to be more tech-savvy and less likely to fall for scams, but when you have a situation like the pandemic where millions of people are on unemployment and expecting checks or stimulus funds, that mindset and need interferes with their judgment,” said Melissa Gaddis, senior director of customer success in TransUnion’s global fraud solutions unit.

Fraud declined in only one area — community forums where fraudsters have to work to convince victims to leave the forum and share their payment details. That fact underscores the relative ease of perpetrating simpler types of fraud in the pandemic’s chaos, Gaddis said.

When consumers were quarantined and stores and businesses quickly rushed to online and curbside sales, gaps opened that fraudsters immediately began to exploit, she said.

“Many businesses pivoted to doing business online so quickly they left the door open to fraud and fraudsters took full advantage of those opportunities,” Gaddis said.

The telecom industry saw a 58% increase in credit card fraud attempts over the last year (such as using a stolen card to buy an unlocked phone), while identity theft attempts at financial institutions soared 57%, according to TransUnion’s data.

Retailers were hit by a 39% increase in fraud attempts around promotions and the travel industry was hit by a 30% increase in credit card fraud attempts, the study suggested.

Community forums, including online dating and networking sites, saw an 11% decrease in fraud attempts leveraging profile misrepresentation during the same period.

“With profile misrepresentation, the fraudster has to work harder to persuade a victim to leave the forum to talk one on one and send money, and the profit margin in that kind of fraud wasn’t worth it with other, easier paths available to criminals during the pandemic,” Gaddis said.

TransUnion’s study found a 21% rise in phishing attacks worldwide, with the increase tied to scams associated with COVID-19, TransUnion’s data indicated.

The top three global regions where fraud originated over the last year were the Seychelles, Kazakhstan and Turkmenistan, TransUnion said.

Tempe, Ariz., Hamtramck, Mich., and Colonial Park, Pa., were the top U.S. cities fraudsters chose as addresses for fake identities and accounts, the data suggested.

“These towns have unassuming names and fraudsters hope they sound more legit,” Gaddis said.

Even as pandemic restrictions ease, the year has given scammers a much bigger playing field than they had before.

“The pandemic shifted many more consumer and business transactions to digital channels, dramatically increasing the attack surface,” said Julie Conroy, a senior analyst with Aite Group.

About 40% of consumers tried a new digital channel or digital service during the pandemic — such as P2P, subscriptions or home delivery of goods — and many plan to stick with these new digital behaviors, she said.

“Many of these digital newbies will be more susceptible to social engineering and scam-based attacks, and I don’t see the problem getting better until we fundamentally adjust our approach to identity-proofing and authentication in the digital channels,” Conroy said.

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