Merchants & Consumers Lose Billions Each Year…but Why?
How much do we lose every year due to online fraud? Well, that’s a surprisingly hard question to answer.
Some experts project that we lose as much as $180 billion every year due to fraud. That’s a mind-boggling figure when examined in isolation. When we break fraud down by source, though, it gets a lot more complicated than one simple calculation.
You see, fraud isn’t some singular, monolithic concept. It’s a very general term describing some deception to make a financial gain. A shadowy figure hacking into a computer system and using stolen data? Sure, that’s fraud. Someone trying to return a product without proper justification? Technically, that’s fraud, too.
Why is Fraud Hard to Define?
While Juniper Research estimates that online fraud costs $32 billion per year, the real costs are likely several times that figure. This is because fraud is notoriously hard to pin-down. Even what we call “online fraud” breaks down into many different threat sources, each with a different cause, different risk factors, and different methods of identification.
Another obstacle we need to tackle is that many fraud victims never even realize they’ve been hit. When consumers can’t identify fraud, it goes unreported. The same is true for businesses who suffer abuse, but never ever realize it happened. For example, take the practice known as “friendly fraud;” this threat source on its own is projected to cost businesses $25 billion by 2020, but most sellers can’t even tell when it happens.
To get a cross-section we can wrap our heads around, let’s examine the small portion of electronic fraud reported to the FBI in 2017. That year, the agency received over 300,000 fraud claims; losses totaled $1.4 billion, or nearly $5,000 per incident on average.
Looking at the data by fraud source, we find more than 20 different tactics. However, the top five of these include:
- Email Compromise: 40% of total loss
- Confidence / Romance Fraud: 12.5% of total loss
- Non-Payment / Non-Delivery: 8.3% of total loss
- Personal Data Breach: 5.7% of total loss
- Identity Theft: 4.6% of total loss
Reported incidents involving email compromise, personal data breach, and identity theft all saw year-over-year increases between 31% and 88%. However, the biggest single jump between 2016 and 2017 was tech support scams, which nearly doubled in economic impact.
As the data shows, fraudsters often go after people perceived to be “easy targets.” Although people over 60 years old represent less than 20% of the population, they were the victims in 31.3% of attacks. In contrast, users under 20 years of age represented less than 1% of victims.
What Can We Do?
Ultimately, consumers must be proactive about fraud. This isn’t something you can take lightly, because even though you might know some basic fraud prevention tips, online fraud is constantly transforming.
Many of the basic tips we’ve discussed on this blog before like avoiding strange email attachments and using antivirus tools are still valid, and you should absolutely take those steps. At the same time, be aware that you need to maintain constant vigilance.
Remember: fraudsters are smart. By the time we develop solutions to counter one fraud practice, it’s entirely possible the average fraudster will have already moved on to the next new tactic. It’s in your interest to keep an eye on new and developing fraud trends, and stay informed about how to protect yourself online and in-person.
Suspect that a recent transaction on your billing statement might be a case of fraud? Contact eConsumer Services today. We’re here to deliver fast, easy, and secure dispute resolution. eConsumer Services is your advocate.