Digital fraud: types, threats to business, ways to combat it

[Man]

In the digital age, online businesses are booming. In 2021, users spending on the Internet exceeded $4.9 trillion. Just huge numbers that mean that for every $5 spent worldwide in 2021, $1 is spent online.

And where such money is circulating, there are scammers. This is one of the main reasons for the rise in cybercrime. After all, there are so many opportunities to "siphon off" easy money from unsuspecting businessmen. It is thanks to this that fraud is growing rapidly and inevitably along with our addiction to the Internet. Therefore, no matter what industry you run your business in, it is likely that you have ever encountered scammers to some degree.

Table of Contents
1. Types of digital fraud
1.1. Payment Fraud
1.2. Affiliate Fraud
1.3. Click and Ad Fraud
1.4. Pseudo-Users
1.5. User Account Fraud
1.6. False Director by E-mail
1.7. Follower Fraud
2. The Rise of Digital Fraud
3. How anti-fraud services work

Types of digital fraud​

So, fraud is a broad term that includes a myriad of methods and applications. But to understand why it has become so widespread and why the fight against Internet fraudsters matters, we will look at 7 of its varieties, the victims of which can be any business.

Cybercriminals use any methods, their main goal is to generate illegal income and cause damage. They are almost like Robin Hoods, only without the "good": they take money from the rich, but do not give it to the poor, but take it for themselves. To do this, they look for loopholes and vulnerabilities in security systems, filters, and devices.

For example, we have previously written about the Russian king of digital fraud, who was caught and convicted in the United States for his cyberattacks on business.

Payment fraud​

Any way in which fraudsters try to use fake or stolen payment details can fall under this type of cyberattack. Most often, attackers fraud with bank cards or their absence at all. It is in this case that they use stolen personal data (account, phone number, transaction verification codes, telephone fraud) to pay for personal needs on the Internet without the knowledge of the cardholder or misleading him.

Fraudsters also use automated processing of a large number of cards in a single attack to determine which of them can be used. This type of digital fraud is called carding.

Attackers can also buy gift cards and coupons using stolen payment data. All this leads businesses to losses from further refunds to victims, loss of goods or services, and litigation.

The most common type of fraud in Russia is phishing. In this case, scammers create a clone site of some real popular online store, marketplace or bank. Even the domain of such a resource will be as similar as possible to the original. A user who is not warned will not see the difference - the site address may differ by one letter, symbol or number.

For example, dank.com or name-bank.com. To place an order and make an online purchase or log in to a personal account, the user enters his personal data on a fake clone page, which falls into the hands of attackers.
But in the search results, search engines quickly "clean" such sites from the TOP, so scammers send links to them through spam emails. The emails are stylized as the design of real notifications from cloned services.

Affiliate fraud​

There are many ways to trick marketers into depriving them of advertising budgets or profits. On the one hand, affiliate marketing is an extremely popular method for bloggers to monetize their content and platforms. On the other hand, there is an open field for abuse and fraud.

The main method is to overstate the number of subscriptions or deceive with the number of clicks on referral links. This is done with the help of bots, click farms and booklets to earn money.

There are other ways to deceive affiliates, for example, using paid traffic (Yandex.Direct or Adwords) to divert traffic from the brand they represent.

Referral fraud can also include fraud with cookies: their substitution or deletion. It is designed to incorrectly attribute clicks, registrations, subscriptions, and checkouts to the target affiliate at the expense of an unsuspecting user.

For example, MediaMarkt and its affiliate program. About half of the orders for which partners requested confirmation turned out to be fraudulent - they used cookie fraud. A user visits the website of a webmaster who participates in an affiliate program and leaves it without any action. In the meantime, the necessary cookies with the webmaster's tag are already embedded in his browser. Thus, if a user made an order on MediaMarkt, it was automatically attributed to this CPA partner.

Click and ad fraud​

Both are closely interrelated, but somewhat different from each other. Click fraud refers to any form of invalid traffic: malicious clicks from competitors, avengers, former employees, as well as accidental clicks. Despite the low volume, these clicks can account for a significant percentage of ad traffic.

Digital ad fraud refers to a more organized process of intentional traffic acquisition, in which automated systems, botnets, and click farms are actively used. As a rule, organized groups of intruders (cybercriminals) operate here on a huge scale.

This type of fraud threatens advertisers' budgets and makes it impossible to attract real buyers and clients, that is, it partially or completely collapses sales.

For example, a group of attackers who own a site (sometimes even more than one) with supposedly high traffic places advertisers' ads on it. Then, in order to imitate clicks on these ads and receive a reward, bots are directed to them, using botnets or click farms for this. If complex automated systems are used for this, then the algorithms for filtering traffic from advertising platforms may not notice such fraud.

Pseudo-users​

Scammers use fake accounts and can wreak havoc on many levels. First of all, in the field of advertising. Also, all these "fakes" were seen adding products to carts on online shopping sites to create a shortage of certain goods, when filling out registration forms, connecting subscriptions, etc.

What is the damage? In useless processing of applications, sending letters to all false addresses, losing money from unsold goods that are actually in stock, in retagging on advertising.

For example, not so long ago, we talked about how scammers use bots in the field of online commerce.

User account fraud​

"I was hacked." What does that mean? That cybercriminals have gained access to the user's personal data and are now using it for fraudulent purposes: transferring funds, placing orders, etc. Moreover, the more data the user has attached to his email account, the wider the coverage of fraudulent actions on the part of attackers.

However, for the business owner, the damage can be more significant, as all this leads to lawsuits, damage to brand reputation, loss of goods and profits.

False Director by E-mail​

Scammers can often introduce themselves as CEOs of companies, and they do this, as a rule, by e-mail. This is a form of phishing attack. The scheme of this type of fraud includes the use of fake domain names (clones of sites), email addresses that are very similar to real ones, monitoring of the company's social media accounts to collect more detailed information, and the use of malware to generate data.

Follower fraud​

Relevant for social networks. We are talking about buying likes and followers to raise the rating of the profile on social networks and its further monetization. Advertisers place their ads in this profile, pay a certain amount and do not receive any return, since the target audience is dummy, bots.

And the downside is services that guarantee you to buy likes, reposts, followers, views, and comments. All this is done through the same bots and click farms. Marketers spend thousands and millions to promote products with the help of such "popular" Insta gurus and bloggers, some of whom are of no value.

Even for really promoted accounts, due to massively consumed content, the number of fake subscribers can reach 15%.

The rise of digital fraud​

In recent years, a sharp increase in all these forms of fraud has been noticed. For example, click fraud in advertising costs advertisers $44 billion a year, up from $500 million in 2005. In fact, in terms of financial damage, it has overtaken payment fraud.

Such figures terrify all large businesses that place ads on online platforms. That is why, in order to save the budget and squander it on scammers, it is worth using all kinds of means of blocking bots and protecting against clicking.

Along with the growth of digital fraud, other types of cybercrime are also growing: the spread of malware, phishing, DDoS, and extortion. They also pose a threat to online businesses and can have a detrimental effect on revenue.

How anti-fraud services work​

Protection services work in accordance with the developed algorithms based on fraudulent behavior patterns. If the system notices suspicious activity, for example, automated, unnatural user behavior on the site, it blocks such a visit, and adds the visitor's IP address to the stop list.

The following markers may indicate possible fraud:

• high bounce rate,
• unnatural click rate (speed of navigation through the site),
• a large number of clicks and transactions (for example, moving products to the cart without placing an order),
• unusual browsing activity or using an unknown browser,
• non-standard operating system,
• geographical inconsistency (for example, setting up ad targeting in Moscow, and clicks come from the Philippines),
• many clicks on ads from the same IP address and hundreds of other parameters.

Individually, they mean almost nothing, but if one such session types several templates at once, the service automatically blocks it.

We can say that anti-fraud services are a symbiosis of pre-programmed analysis and machine learning. This is an integral aspect, as cybercriminals are constantly evolving their methods of deceiving advertisers. Bots and malware are improving, which means algorithms must keep up.