‘Tis the season for festive fraud

It’s no secret that holiday shopping is a boom for retail, and the prominence of double-digit sales like 12.12 continue to be one of the best opportunities for consumers to find a big bargain in Asia. Given the current state of the economy, coupled with inflation and the concomitant price increase we’re seeing on nearly all products and services, consumers are going to be hunting harder this year.

As increasingly more of these shopping activities are occurring online, and just as we are eager to see huge price drops in our favourite shopping items, fraudsters also see this as a great opportunity to lure undiscerning shoppers.

Common fraud schemes

Specifically this holiday sale season, we anticipate that real-time payment fraud will increasingly become a common ploy. With real-time payment fraud, customers might be asked to pay using money orders, wire transfers, or account-to-account payment. If they send money through these methods, they’ll unlikely get it back. Since the cash is transferred nearly instantly, victims don’t have any time window to reverse the payment once they realise they have been deceived by an illegitimate business or fake website. Fraudsters then proceed to swiftly launder the money through a maze of accounts, making it difficult to trace.

These schemes are often carried out by taking advantage of people’s tendency to click on what may look like an attractive deal for highly sought-after goods, or fake delivery notifications with a phishing link. Given the boom in e-commerce thanks to the pandemic, shoppers aren’t just purchasing off long-established, secure sites, but often making purchases from smaller online retailers for the first time.

To facilitate these holiday online shopping scams, fraudsters often lure consumers onto a site via social media (usually for items that are high in demand like electronics or limited-edition fashion, sneakers, and luxury goods) and trick their targets into transacting outside of the e-commerce platform. However, the items may be counterfeit products, or worse, they don’t arrive at all.

Ways to avoid festive fraud

To avoid falling prey to such schemes, consumers should take preventative measures to protect themselves against festive fraud. These include the following:

  • They should be selective and shop on official websites or mobile apps where possible.
  • When making purchases on third-party platforms, it’s always a good idea to cross-reference with official sources if a deal seems too good to be true.
  • If they suspect a fraudulent charge, the bank should be informed immediately.
  • Consumers should also be mindful when receiving scam text messages with links to bonanza sales or even emails masquerading as recently purchased receipts.
  • They need to do their due diligence and verify that the offer is from an official source before clicking on any links and be discerning about small discrepancies such as counterfeit links which mimic official websites. 

However, even with the best precautions, savvy consumers are still vulnerable to being exploited. Financial institutions have an added responsibility to their customers and a role to play in taking a proactive stance in mitigating consumers’ risks.

Banks should engage in customer education on the safe use of payment cards and digital banking credentials will be valuable. There are also new advances in AI models that can help spot uncharacteristic spending behaviour or significant transactions that may be unauthorised.

It’s also important to have intelligent two-way communication with customers that can reach them in any channel whether it’s SMS, email, phone call, or via an app alert.

Collectively, these measures can develop trust with the consumer, as they will realise that their financial institution is able to help prevent likely fraud, and is involving them in confirming what is legitimate and what might be a scam.