Blog post

Online Fraud and the Pandemic

By Akif Khan | May 12, 2020 | 2 Comments

Security and Risk Management Leaders

A common theme in the inquiry calls that I am getting at the moment is clients seeking insight into how the pandemic is affecting online fraud rates. It’s a valid and interesting question, for sure…….and one to which I don’t have the answer.

Various vendors have released reports discussing what they’re seeing across their own client bases – although if you cast a critical eye across many of these reports they are really telling you more about how ecommerce volume is varying across industries, rather than actual data about fraud rates. Online grocery shopping is up, airline bookings are down.

With no consistent approach to looking at this across the different vendors, it’s hard to draw meaningful conclusions. Some of the data seems to show a relative increase in transactions that are judged to be fraudulent and declined, and an increase in login attempts that are deemed to be account takeover (ATO) and are blocked. Other data isn’t quite so clear.

For vendors this represents an opportunity to address a potentially growing need for their services, but it’s also important not to be seen to be exploiting the situation to stoke up demand for services. It’s unclear where that balance lies.

How useful is it to know whether there is an increase in fraudulent activity during this pandemic? I’d argue that you need to keep your guard up at all times as a B2C business, whether in banking or ecommerce or in other verticals. You should be regularly reviewing your fraud detection strategy and the capabilities that you have deployed, deciding how you want to strike the balance between risk and CX, and working in close partnership with your vendors. That should be your BAU approach whether there is a pandemic or not.

What has been more interesting to me is how businesses have had to adapt their existing fraud screening processes – not to look out for more fraudsters specifically, but to adjust to new norms of shopping behaviour and not decline genuine customers. Rules and models may have been accustomed to your pre-pandemic behaviour…..the days and times when you shopped, how much you typically spent, the device that you used. Once in lockdown, that may all have changed, and many fraud detection strategies may have been struggling to keep up. Buying 24 tins of tomatoes and half a dozen velour tracksuits online at midnight on a Weds night may have looked suspicious a few months ago, but now….not so much. A flippant example perhaps, but illustrative nonetheless.

The key message coming out of all this to me is not whether your fraud detection strategy is able to deal with (possibly) higher rates of fraud attacks. It’s about how flexible and easily adaptable your fraud detection strategy is to unexpected changes in the environment. Succeeding in the pandemic isn’t just about stopping more fraud attacks. It’s about adapting to changing customer behaviour to ensure that the vast majority of your customers who are genuine and in desperate need for those tinned tomatoes and velour tracksuits in the middle of the night can get what they need.

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  • Barry Bowen says:

    Great blog Arkif

    Adapting to changes what ever they are are important, normal behaviour can change, and the CX should not be impacted, one way to address this challenge is to manage the customer journey using all risk signals and events across all systems to determine an outcome like OTP, SMS block, permit etc.. orchestration is a game changer in closing the gaps within fraud prevention and general banking operations around the customer.

    • Akif Khan says:

      Thanks Barry. I agree that effective orchestration is a key component of being able to adapt to changing customer behaviour. I’ll be making a blog post on orchestration in the coming months.