Digital Fraud Is Down Overall, But Several Industries Are Still At High Risk

Thanks to more businesses implementing fraud-prevention tools, global digital fraud decreased more than 22% during the first quarter of 2022, compared to the same period a year earlier, according to TransUnion LLC’s quarterly digital-fraud analysis, released Thursday. 

On a per-category basis, financial services, telecommunications, and retail all saw declines in attempted digital fraud. Financial services posted the biggest decline, a more than 63% year-over-year decrease in attempts, followed by telecommunications, which saw a more than 20% decline during the same period. 

When fraud in financial services did occur, it was most likely the result of first-party application fraud, which occurs when an individual completes a fraudulent application that contains intentionally inaccurate or manipulated information with the intention of receiving a lower rate or better terms for a policy or contract. TransUnion says.

Another category posting a decline during the first quarter was retail, which saw a more than 7% drop in attempts compared to the same period a year ago. And communities, which include online dating sites and forums, posted a more than 6% decline during the same period.  

TransUnion based its numbers on more than 40,000 Web sites and apps in its TruValidate product suite that either denied or reviewed a transaction due to fraudulent indicators. Digital fraud occurs when criminals use email, Web sites, malicious software, or other methods to obtain personal details about consumers or trick them into making a payment.

Despite the overall decline in fraud and the drops posted in several categories, digital-fraud rates crept up in several merchant categories, including insurance, gambling, travel and leisure, and gaming. Insurance companies were favored targets, with digital-fraud attempts increasing more than 124% during the first quarter. Gambling and logistics had the next-largest increases at more than 50% and more than 42%, respectively. 

The logistics industry was mostly impacted by shipping fraud, which occurs when a buyer spoofs a shipping address or when a seller receives payment for goods or services but never ships to the buyer. In addition, TransUnion says fraudsters may be trying to take advantage of the continued challenges in the logistics industry as retailers struggle to ship goods in a timely manner.

Other industries to see increases in digital-fraud attempts were travel and leisure, which registered a more than 13% increase, and gaming, which saw a nearly 7% increase. 

A big reason fraudsters are changing the industries they target is that they continually search for targets that are most vulnerable to their scams and adjust their strategy accordingly, TransUnion says.   

“Sophisticated fraudsters pressure-test which industries have ramped up fraud-prevention measures, and, as a result, turn to new industries if efforts are being thwarted. That’s exactly what we have observed recently as fraudsters look for new opportunities or points of vulnerability,” said Shai Cohen, senior vice president of global fraud solutions at TransUnion, in a prepared statement. “It is paramount that, during this dip, companies focus on optimizing the customer experience for good customers.”