5 Most Common Types of Fraud Attacks Against Digital Products
Digital products are revolutionizing how people buy. It’s the best of all worlds: easy, instant gratification at any time of the day or night.
- Half the all music sales last year were digital purchases.
- More than 90 billion app store downloads in 2016
- Mobile app revenues are up 120% since 2014.
- Revenue for cloud-based services will top more than $246 billion this year.
Consumers aren’t the only ones who love digital goods. Fraudsters do, too, because digital goods are easy money.
- Stolen digital goods don’t have to be stored in a warehouse. Instead, millions of dollars in stolen property can be saved digitally on a smartphone, a laptop computer, or a tiny USB stick.
- Stolen digital products are easy to sell, too. They don’t have to be physically shipped to the buyer. Fraudsters can resell them quickly and easily on hundreds of legitimate or illegal secondary marketplaces.
And while digital goods are subject to all the same fraud attacks as physical goods, they’re particularly susceptible to specific fraud tactics due to their unique nature:
- Friendly Fraud and Payment Fraud. The term “friendly fraud” comes from “friendly fire” because friendly fraud chargebacks harm the consumer’s supposed allies. Friendly fraud can be innocent—a cardholder doesn’t recognize a charge on his monthly statement and mistakenly files a chargeback. Or it can be malicious—a consumer files a chargeback because the 60-day window for returning a purchase has lapsed. On the other hand, payment fraud is outright criminal stealing: fraudsters use stolen credit card accounts to fraudulently obtain digital goods or digital account access.
- Mobile & Mobile App Fraud. Mobile is a popular platform for all sorts of digital products—music, streaming video, e-tickets and more. Unfortunately, mobile is also a popular platform for fraudsters: 60% of overall fraud originates on mobile.
- eGift Cards. The holidays are coming. And so is eGift card fraud. With so many targets—8 out of 10 of the top internet retailers offer eGift cards—it’s easy to understand why they had the highest fraud attack rates of all products sold between Black Friday and Christmas last year. In fact, nearly 1 in 10 fraud attempts this holiday season will target eGift cards.
- Account Takeover (ATO) and Account Sharing. ATO increased 31% last year and malicious account creation was up 20%. What’s worse, it’s difficult for online game and gaming sites, streaming media, subscription services, stock image libraries, etc. to tell the difference between digital thieves and legitimate customers who are sharing their credentials. After all, more than 1 in 5 adults “borrow” passwords for streaming video accounts.
- Card Testing. Small-ticket transactions for digital products make big targets for carders—fraudsters testing stolen credit cards to see if they “work.” The small order amount leaves plenty of credit in the account for a big score somewhere else. And this can lead to TC-40 problems (these merit a blog post all on their own: “A Monster Named TC-40”).
Want to know how you can fight fraud attacks against your digital products? Download the eBook “Fraud in a Digital World”. You’ll discover the latest insights and top strategies for beating fraud, reducing mitigation costs, and increasing sales in the digital goods world.