Not unlike rust, fraud never sleeps. And if it’s not one thing, it’s another. At this moment merchants remain vulnerable to the never-ending cycle of new and recycled attack vectors.
“Promotion abuse is rampant among retailers, restaurants and other firms, and individuals are taking advantage of rewards, sales, discounts or other special offers multiple times while disregarding the terms and conditions that apply to them,” according to PYMNTS December 2020 Digital Fraud Tracker(R) done in collaboration with Simility.
The new Tracker notes, “The pandemic is aggravating this type of fraud in two ways: Merchants are offering more discounts to draw in customers and keep their businesses afloat, and the lower margins due to the economic downturn mean that all profit reductions disproportionately hurt businesses. One report found that as of May, there had been a 54 percent increase in gift card and loyalty fraud compared to the previous month.”
Yes, it’s a complex problem. Luckily, the pandemic is bringing forth smarter artificial intelligence (AI) solutions calibrated for just these kinds of pandemic-era scams. The December 2020 Digital Fraud Tracker(R) is a study and compendium of highly effective fraud-fighting techniques.
Eying COVID-Era Fraud Favorites
A rise in promotion abuse is tracking with the superabundance of offers, deals and discounts flooding the markets in these closing days of COVID’s weird winter gifting season.
Rahul Pangam, VP of risk strategy at PayPal, told PYMNTS, “In an effort to bring in new customers and encourage growth, businesses often turn to special promotions that offer incentives, like free meals or discounts on first purchases. Unfortunately, fraudsters have found ways to abuse these programs … [using] large stores of stolen personally identifiable information (PII) and stolen cards, fraudsters sign up for multiple accounts on merchant platforms and then repeatedly take advantage of offers that are intended to be one-time use.”
It’s much the same story with gift cards and accounts now being remotely created in battalions. Reminding merchants that they’re far from helpless, he pointed to common red flags.
“Keep an eye out for multiple accounts being created with the same email address or phone number [and] reach out to the customer for clarification and more information or terminate the loyalty account, depending on what the best course of action is for your business. Many of these fraudsters often leave a trail of chargebacks in their wake, particularly if redeeming the sign-up promotion involves making a purchase. Investigate accounts linked to email addresses or phone numbers that are consistently filing chargebacks — these are often culprits of promotion abuse,” Pangam said.
Spotting (And Stopping) Irregularities
The December 2020 Digital Fraud Tracker(R) documents efforts of players like Walgreens as they combat promotion abuse with smarter AI, and advanced tech like adaptive decisioning.
Luke Rauch, vice president of customer experience and owned brands at Walgreens, told PYMNTS, “The biggest single [fraud] threat for us right now is the ability to create artificial coupons that look and feel legitimate. It puts us in a bind. Either our point of sale rejects it or we want to do the right thing for the customer because, unfortunately, the customer often doesn’t actually know they’re trying to redeem a fraudulent coupon.”
Like other companies hard at work on the problem, PayPal is staying in the vanguard with an arsenal of anti-fraud tools that are making promotion abuse more difficult to pull off.
“Our strongest recommendation for tackling promotion abuse is to equip fraud, trust and safety teams with adaptive, intelligent, machine learning-based fraud prevention solutions powered by robust data collected over decades of transactions,” Pangam said.
He added, “These solutions will help spot irregularities and red flags throughout the customer journey from account creation to checkout and will continue to learn and help mitigate fraud, even when fraudsters attempt to change up tactics to avoid detection.”