Online retailers see sharp rise in retail fraud

The fashion and retail industry has seen a surge in account takeover fraud, as cases filed to the UK's National Fraud Database (NFD) jumped by 142 percent in the first half of 2024, according to data from Cifas, the UK's leading fraud prevention service.

The increase poses a significant challenge for online retailers, particularly in the fashion sector, where high-value items such as designer watches and luxury apparel are prime targets for fraudsters.

Facility takeover fraud, where criminals use compromised personal data to hijack existing customer accounts, has more than doubled compared to the same period in 2023. This type of fraud now ranks as the second most prevalent threat for Cifas' online retail members, surpassed only by online payment fraud.

Simon Miller, Director of Communications at Cifas, said in a statement: "Facility takeover fraud has been causing chaos for both retailers and shoppers for many years. When criminals attack online, they can access high volumes of consumer accounts exploiting sensitive information and moving on swiftly before being detected."

Fashion and luxury are prime targets

The fashion industry is particularly vulnerable due to the high resale value of its products. Fraudsters are targeting accounts with stored payment information and purchase history, swiftly changing security details to lock out legitimate users. In some instances, they add digital wallet services before attempting to purchase easily resold items such as high-end phones, watches, and even luxury apparel.

Cifas intelligence suggests that phishing attacks remain a favoured tactic, with criminals creating sophisticated fake websites and communications mimicking well-known fashion brands to lure consumers into sharing sensitive information.

The rise of automated attacks is also causing concern. Retailers report an increase in the use of bots for 'credential stuffing', where stolen login details are used to gain unauthorized access to consumer accounts. Worryingly, perpetrators are now programming these bots to mimic human behavior, making detection more challenging for online retail platforms.

The demographic most affected by this fraud trend is consumers aged 30-50, accounting for 56 percent of the more than 13,700 facility takeover fraud filings in the first half of 2024. This age group is likely targeted for their established credit profiles and higher spending power in the fashion and luxury goods market.

Industry experts stress the importance of collaborative efforts in combating this growing threat. "The sharing of multi-sector data and intelligence not only helps retailers to combat this growing threat but means we can all take collective steps to mitigate risks," Miller added.

As the fashion industry continues its digital transformation, bolstering cybersecurity measures and educating consumers about account protection have become critical priorities. Retailers are advised to implement robust fraud detection systems and to regularly update their security protocols to stay ahead of evolving criminal tactics.

For consumers, experts recommend vigilant management of personal information, regular monitoring of account activity, and cautious engagement with online communications purporting to be from fashion retailers.