Customers behind a rising tide of casual fraud and how they do it

A rising tide of casual fraud is hitting Britain’s online retailers as customers abuse the system in ways ranging from sharp practice to outright scams.  

The number of customers engaging in this is on the rise, according to a new report from fraud prevention firm Ravelin. It says one in three online businesses say ‘criminal customers’ are now their number one risk factor.

The report highlighted four customer frauds on the rise: claiming items did not arrive, ‘free-renting’ clothes by wearing and returning them, fake returns, and refund / promotion abuse.

The extent of the abuses led Ravelin to state that online merchants’ own customers are almost as likely to commit fraud against them as organised criminals.

Casual fraudsters: Customers abusing the system in a number of ways are on the rise, says a new report (stock image)

Ravelin said more than a third of finance leaders describe first party frauds including ‘friendly fraud’, returns, and promotions abuse as the biggest risk facing their business.

Payments fraud remains the number one business risk for respondents, followed by friendly fraud, account takeover, and policy abuse. 

It said that 52 per cent of merchants reported an increase in returns and refunds abuse, as well as promotions abuse.

The prevalence of both casual criminal customers and professional organised fraudsters has increased significantly over the last 12 months. 

The report said that the cost of living crisis had contributed to the rise in fraud, while 35 per cent of chief financial officers said the Covid-19 pandemic also increased fraud in their business.

Jason Lane-Sellers, director of market planning at LexisNexis Risk Solutions agrees that friendly and first party fraud are both on the increase. 

‘Some of it is driven by economic conditions as any financial crisis will always result in a level of rise in attempted fraud’ he says. 

In the latest Cybercrime report from LexisNexis (due in May), Lane Sellers says almost a quarter of all fraud reported to their network is related to first party situations, where the valid customer is involved in committing the fraud. 

The Ravelin report showed how businesses were reporting a rise in fraud across types

The trend seems particularly pronounced among younger age groups according to Ravelin. 

A separate report by fraud agency CIFAS found one in 13 people admitted to involvement in some sort of first-party fraud – rising to one in seven among digitally-savvy 16-34 year olds.

Consumer expert Martyn James points to another common dispute where complaint numbers are rocketing, among those who sell their goods online through an online marketplace such as Ebay or Etsy. 

Many of these sites have buyer/seller policies, giving you some rights if anything goes wrong. 

‘This is where things get murky though’, says James, because some customers claim that when they received the parcel, there was nothing in it. 

When it comes to sellers proving they sent the items he says ‘short of sealing the parcel in front of the courier and getting them to witness it, this is virtually impossible’. 

It’s not just small business owners who are affected by this return scam. James says that Amazon too gets hit by this with the firm writing off these claims if the value is under a certain amount.

Martin Sweeny, CFO of Ravelin said that the main response to growing fraud from retailers is ‘to throw more money and resources at it: bigger fraud teams, more processes’. 

He claimed that this is unsustainable as fraud will continue to grow and mutate. Instead, he argued that firms needed to become smarter at spotting and preventing fraud.

Retailers recognise the vast majority of internet shoppers are scrupulously honest, but also that they need to be increasingly vigilant for those who are not, he adds.

This post first appeared on Dailymail.co.uk