Top 5 Fraud Trends as Holiday Season Approaches

September 27, 2022

By Nicole Reyes, Director, Fraud Prevention at Co-op Solutions 

Nicole Reyes

Over the past few years, there’s been a notable migration from in-person to e-commerce shopping. Coupled with the shift to EMV chip cards, which has significantly reduced card present fraud at the point of sale, the industry has seen a sharp uptick in card not present (CNP) fraud. 

According to Insider Intelligence, domestic CNP fraud losses are projected to reach $8.75 billion this year, an increase of 11.3% over 2021. By 2024, CNP fraud is projected to top $10 billion and account for 74% of all fraudulent card transactions. 

Co-op credit union client portfolio data also shows CNP as the highest reported category of fraud, at 79%. The top merchant classifications for CNP fraud volume include Digital Goods/Gaming (which includes Microsoft), Computer Software (think streaming services), Eating/Restaurants (including popular delivery apps like Uber Eats and Door Dash) and Money Transfers (such as Apple Cash). 

Top 5 Scam Trends to Watch Now 

As the holidays approach here are some of the fraud trends we’re watching at Co-op: 

  1. P2P scams:

    Per Javelin Strategy & Research, 18 million Americans were defrauded through scams involving digital wallets and person-to-person payment apps in 2020. That number has not declined—if anything, it’s increasing as P2P grows in popularity. In fact, half of respondents to a recent survey from Allstate say that P2P scams concern them, and 29% say either they had been a victim or know someone who has. 

    One of the latest scams in this arena is the “flip.” In this scheme, the victim receives a direct message or views a social media post requesting that they send a certain amount of money—typically small dollars—in return for a promised larger sum. The victim, sensing a quick payday, sends the money, and never hears from the requester again. 

  2. E-commerce scams:

    As supply chain issues captured the world’s attention, shipping fraud increased nearly 800% worldwide in the past year— making it one of the biggest threats to consumers. 

    One common type of e-commerce scheme is the “pre-sale” scam, where fraudsters pose as sellers on social media platforms and offer lucrative student discounts. The victim, lured by attractive deals, submits payment upfront, and the fraudster vanishes without delivering the items purchased. Easy targets include students looking to purchase college textbooks at a discount, as well as consumers in the market for pricey, highly desirable items like concert merchandise. 

    The “giveaway” scam is another common method used by fraudsters, whereby they entice unwitting consumers to provide their personal credentials in exchange for “free” stuff. 

  3. Employment scams:

    The industry has seen a rise in employment-related scams and phishing attempts since the pandemic. According to the 2021 BBB Scam Tracker Risk Report, employment scams were the second-riskiest type of fraud behind online purchase scams for the 18-24 year-old demographic, and third-riskiest for those in the 25-34, 35-44 and 55-64 brackets. 

    LinkedIn holds the top spot as the most impersonated brand used in phishing scams, accounting for 45% of phishing emails observed in the second quarter of 2022. 

  4. Scholarship/financial aid scams:

    Scams aimed at students, prospective students and recent graduates are a seasonal problem in the fall, as the deadline for financial aid approaches in October. Following the Biden Administration’s recent loan forgiveness announcement, there has been a sharp increase in education and student loan scams. 

  5. Romance fraud:

    As Americans increasingly go online looking for love, the fraudsters follow. According to Bloomberg, fraud losses on social media ballooned in 2021 to $770 million. Of the most popular types of fraud conducted over social media, 24% were romance scams, behind only investment scams in volume. 

Tips for Addressing Fraud Risk 

Payment fraud is on the rise, but credit unions have several tools at their disposal to stay one step ahead of the fraudsters. To effectively navigate and respond to today’s dynamic fraud environment, it’s best to take a flexible, multi-pronged approach.  

EMV® 3-D Secure (EMV 3DS) is a powerful way to prevent fraudulent activity before it occurs, whether through P2P or other methods like BIN attacks and account takeover. EMV 3DS is a globally deployed technology supported by all major payment networks that helps reduce fraud for digital card-based transactions, including online and e-commerce payments. EMV 3DS offers secure one-time passcode (OTP) as an optional additional layer of protection that helps verify a member’s identity at the point of purchase.  

When it comes to P2P scams, member education represents a credit union’s best first line of defense. Make sure you are communicating with your members regularly about the latest fraud trends and social engineering scams. Warn them about “friendly fraud” schemes where fraudsters request an unwitting victim to deposit a check in their account and then send the funds back to the criminal through a P2P app. In these scams, the check turns out to be illegitimate, and the victim (or the credit union) ends up on the hook for the missing funds.  

Card controls and alerts are another powerful way to deputize your members and make them an active part of your “fraud prevention team.” CardNav® by Co-op allows members to receive transaction-level alerts and control when, where and how their cards are used – in advance and in real time. This inspires member confidence, increases member engagement with the mobile channel and helps your credit union meet its digital strategy. 

Also remind your members to protect their account information and passwords, never give out authorization codes or information to someone who they think is calling from their credit union and to only use P2P services with people they know and trust. 

Lastly, to help stay on top of the latest fraud trends, make sure to regularly visit independent, reputable sites like the FTC’s Consumer Advice page, and the BBB’s Scam Tracker

Co-op’s Fraud Prevention Consultants are here to help, by working with you to build and customize fraud strategies that include the optimal mix of multiple scoring solutions, including EMV® 3-D Secure with OTP. For more information about Co-op’s Protect solutions, contact your Client Business Executive. 

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