Has Retail Fraud Moved Online?
By Johnny Norris, Director UK Markets
[Note: Today’s post is from our offices ‘across the pond’ in the UK.]
News this week from ComputerworldUK tells us that large merchants have seen an increase of over 10% over twelve months in fraud through their online businesses. Notably, a considerable piece of this issue has to do with the use of multiple identities (33% of large retailers saw this) and the difficult problem of internal theft.
One of the issues facing multi-channel or Internet retailers is that online fraud is often quite different from store based problems. It’s seen by perpetrators as anonymous, and it is considerably easier to appear to hide identity. Combine this with the ability to ‘pass on’ goods via online auction sites and retailers are facing attack from external and internal sources (often combined). According to the CyberSource research, many retailers are willing to invest in technology to tackle the issue, but most solutions are based on exception and don’t always tackle the huge identity issue.
But, there is good news! Traditionally, store based retailers in the UK have not collected much in the way of customer or returns data (certainly as compared to US retailers), but the online/multi-channel boom is changing that. Retailers now face the issue of what information to store and how to deal with the deluge of it. Fraud analysts haven’t increased in number, so retailers must find a way to harvest ALL their information sources (whether it be employee or customer data) and provide their fraud/security teams with prioritized, high quality information on those using multiple identities, or even working in an organized way. Organized Retail Crime (ORC) wasn’t mentioned in the article, but this is a key area and often the way it can be detected is to identify links or relationships between customers or customers and employees.
Identity resolution technology (AKA entity resolution and analysis technology) that can identify the use of multiple identities and detect fraudulent relationships (or ORC) is now in existence, but not many companies offer the full range of elements. Importantly, this technology can be used to look at the problem of e-fencing via online auction sites as well. Looking for the subtle matches between stock that has gone missing and, say, an online vendor with details a lot like an employee may be a critical step in stemming this fast growing fraud problem.
Can retailers accept a 10% year on year rise in fraud? We think they shouldn’t have to.
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