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A new report from Sift Science debunks 10 popular fraud-related myths

October 24, 2018

Unfortunately, fraud crimes remain a hunch-based science. Nigerian princes are internet scam kingpins, all fraud must happen while you are sleeping, and most fraud occurs during the holidays. Yet, all of these myths are surprisingly untrue. In reality, Mauritania has the highest rate of fraudsters in the world, fraud happens all the time (not just at night), and the most fraudiest day of the year was May 9th.

Thanks to a new report from Sift Science, a machine learning company focused on providing risk-free user experiences, they were able to debunk 10 long-established fraud-related myths and provide helpful data-driven insights by examining the details of over 165 billion transactions.

The other 7 debunked myths were:

  1. Myth: Fraudsters make small purchases to fly below the radar. Many businesses don’t allow users to make large purchases without first going through extra security verification. To avoid detection, fraudsters keep their purchases small.

Reality: Fraudsters make massive purchases. On average, a good order comes to around $910. The average fraudulent order, by contrast, amounts to about $3300.

  1. Myth: Republicans/Democrats are crooks! No comment here, but a person’s point of view on who’s a crook is often influenced by their political leanings.

Reality: There’s no correlation between a state’s political affiliation and its population of fraudsters. New York, Delaware, and New Jersey – all blue states – have some of the highest rate of fraudsters, but so do Georgia, Texas, and Florida … all red states (based on U.S. Presidential election results from 2016).

  1. Myth: After committing account takeover (ATO), fraudsters lie in wait for a while before using the stolen account. An ATO can sometimes arouse a user’s suspicion or raise a business’ red flags. So fraudsters don’t do anything with a user’s stolen account credentials until they believe the coast is clear.

Reality: Once fraudsters have stolen account credentials, they don’t wait around. For businesses that experience the highest rates of ATO, a compromised user’s account activity increases an average of 22x within a week of the takeover. Fraudsters use stolen credentials as much and as quickly as they can before the user or business redeems control of the account.

  1. Myth: Activity from ATO is just a blip on a user’s overall transaction history. After they’ve stolen account credentials, fraudsters usually don’t get away with very much. The damage is small and ultimately insignificant: just a few small fraudulent purchases.

Reality: After an ATO, a fraudster’s activity represents up to 60% of the user’s annual spending. This holds true even if a fraudster only has control of a user’s account for a week.

  1. Myth: Fraudsters use stolen account credentials once or a few times after an ATO. Then they throw them out so they won’t raise any red flags by continuing to use the account.

Reality: If a fraudster can get away with it, they’ll keep using stolen accounts until they’re caught. Even 300 days after an ATO, affected businesses see a spike in median transaction value on stolen accounts.

  1. Myth: People commit fraud as a side hustle. Fraudsters have day jobs, so they only have a chance to commit scams when they aren’t at work.

Reality: Fraud is a day job. Most fraud happens during standard working hours.

  1. Myth: During the holidays, most fraud happens around Black Friday or Cyber Monday. Last year, Black Friday deals brought in a record $7.9 billion. Cyber Monday raked in an additional $6.6 billion. With that kind of money flying around, fraudsters take advantage of the chaos to commit their crimes. Dishonest users might also try to get ahead on their holiday shopping by committing promo abuse and using multiple emails to score deals.

Reality: The fraudiest day of the holidays is…not Black Friday or Cyber Monday. Last year, December 6 saw a higher rate of fraudulent transactions than any other day during the holidays. Surprisingly, that date is different for travel and online retail businesses. For travel, the fraudiest day was November 25 – two days before Thanksgiving. For online retail, it was December 3.

Here at OWI, we agree with Sift Science that the identity industry is served well to understand the true behavior of bad actors in order for people to be more informed and better protect themselves. Moreover, we now have the power of new technology, such as machine learning, to help people process more data efficiently, identify meaningful patterns , and help good actors go on the offensive and stop these bad experiences from occurring.

For more information on this study please find a link to the full report here.

Additionally, Sift Science just announced the launch of Sift Insights, a new reporting suite built into the Sift Science Digital Trust Platform. Click here for more information on this announcement and further product details.