Apparel, Food Delivery Hardest Hit by Online Fraud Attacks

New Forter-Merchant Research Council report confirms that EMV chips have moved fraudsters away from point-of-sale to online.

The anticipated shift of retail cybercrime to ecommerce in the wake of the EMV point-of-sale adoption has officially begun, with the online fraud attack rate increasing by 8.9% in 2016, a new study shows. 

Attacks against apparel companies rose 69.9% in 2016 and attacks against food delivery companies jumped 49.8%, compared with the year before, according to the research released today by Forter in conjunction with the Merchant Research Council.

Domestic orders have also shown a notable rise in fraud attack rate, becoming 79% riskier than they were in 2015. This has had a direct impact on the bottom line risk, resulting in a shift from $2.70 at risk per $100 of sales in Q4 2015, to $4.98 in Q4 2016.

The study collected data on the attack rate, aggregated by yearly quarters. The researchers define the attack rate as the average dollars at risk out of every $100 of sales.

"Now that the fraudsters have been pushed online, it’s much tougher to steal high-priced goods like jewelry or Rolex watches," says Michael Reitblat, CEO at Forter, a fraud detection firm. "In the past they would have gone for luxury items, but now it’s easier to attack smaller, cheaper items like apparel."

Reitblat adds that the same principle holds true with the increased cybercrime in the food delivery sector, especially now that the fraudsters have access to service-based tools that make it easier for them to use one stolen credit card to set up fraudulent websites that can steal hundreds of orders.

"What they do is use a stolen credit card to set up a fake account on a website or Facebook account," Reitblat explains. "Then they will use that stolen credit card for other, high-volume fraudulent transactions. So they’ll set themselves as a third party to GrubHub, for example, take your money and still won’t pay GrubHub."

While it’s true that fraudulent activity has moved online, the shift is still in its early stages, notes Randy Vanderhoof, director of the U.S. Payments Forum.

"I think it will be really interesting to see what the numbers are in another two years once transition to EMV chips has been fully implemented," Vanderhoof says. "I think that the retailers that do business both in physical stores and online need to be careful. They need an integrated fraud security strategy and can’t let their guard down in their physical stores."

Forter's Reitblat says retailers must continue to invest in security technology such as behavioral analytics to track fraud before it happens. He also thinks retailers will deploy two-factor authentication and use biometrics as the technology becomes more mature. 

"We’re also working with a lot of retailers to share fraud data with us so if we see a new attack method, we can warn the retailers," Reitblat says. 

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