Caught in a Bad Romance: The Rose-Tinted Glasses of Our National Day for Love

From dating apps, electronic love messages, gift deliveries, money transfers and beyond, people are constantly seeking new and creative ways to express their love and adoration to those around them. Since the COVID-19 pandemic and its result in the closures of numerous retail businesses, as well as more independent and boho brands creating online stores, the number of ecommerce sales has rocketed. Statista showed that 2.14 billion people were expected to shop online in 2021, which is up from 1.66 billion people in 2016. Whilst cyberscams occur all year round, there is a large spike that we see around Valentine’s Day because numerous ‘lonely’ consumers become prime targets of romance scams. It would be easy to assume, that it is the senior generation, who are most susceptible to scams, however younger generations are also falling into traps particularly through social media love scams and ‘influencer’ posts of discounted products from irreputable brands. Conned into transferring funds and making online purchases, we see targets of crimes willingly spending their funds or taking out loans for a ‘lover’ under a guise. Additionally, criminals step up to the plate with fraudulent claims to receive chargeback funds. Metro Bank warned merchants and shoppers who are looking for love to remain guarded as they saw a 43% increase in romance scams from 2021 to 2022 alone.

But how is cybercrime getting easier for scammers? With the convenience of large conglomerates, like Amazon, and bespoke gift providers, such as Moonpig and Pandora, people have taken their purchases online. Shoppers look for convenience and speed, with online shops offering rapid checkouts, free delivery and returning-customer discounts to encourage brand loyalty. But as a consequence the percentage of ecommerce fraud has doubled from 20 billion USD to 41 billion USD from 2021 to 2022, with an estimated growth to 48 billion USD in 2023. And so, education on how to see risks and mitigate them are key for all players as the threat of financial crime is rife not only for consumers, but for businesses too.

What is ecommerce fraud?

Also known as payment fraud, ecommerce fraud occurs in the form of a chargeback. A customer can present their bank with a reason as to why they should not have been charged for a transaction, and the bank can issue a chargeback to compensate them. The chargeback transaction withdraws the funds from the merchant, whilst returning them to the customer. There are two more common forms of chargeback fraud: friendly fraud and clean fraud.

Friendly fraud

This form of fraud occurs when a merchant receives a chargeback because the customer denies receiving the order or even making the purchase despite the fact that the goods actually were delivered.

Clean fraud

Clean fraud is a common identity theft process in which the transaction looks legitimate, however a third party has stolen the account information of an individual to make purchases. Often the account holder has no clue that they are a victim until the transactions have occurred and they claim a chargeback.

From a business perspective there is huge financial loss in fraudulent claims, but the indirect losses can be far greater – reputational damage. With customers losing faith in a brand, resistance grows in checkout friction, making it harder for businesses to have complete transactions. So we’ve spoken with Unlimit’s Cybersecurity Lead, Pavel Semenov, for greater insights around cyber security and Valentine’s Day to see how businesses can minimise risk.

Why do you think that cyberscams increase over Valentine’s Day?

Our awareness decreases during the festive periods, and we place our focus on getting the best gift possible and enjoying celebrations. Scammers, sadly, take advantage of consumer pleasures and prey on individuals with hopes that they have disassociated from caution.

Since the pandemic where people were unable to meet others in person, and also businesses took to pursuing online stores, the concept of cybercrime and scamming became a lucrative niche. However, organisations have also been investing into speedy technologies to thwart attackers and minimise risk. Currently due to the surge in online transactions from 2020, there is a constant tug of war between security developments, and criminals inventing new ways to commit fraud.

What threats should a merchant look out for, and how can a business protect itself from cybercrime?

Threats come in various ways, from the chargeback transactions to more complex infiltrations of virus infections to corrupt security and result in data leaks during the downtime of a service after a distributed denial-of-service (DDoS) attack. In the worst case scenario, businesses will see a disruption to their services, but it is common for cybercriminals to take quick wins over the idea of a more complex attack unless there are large profits available for gain.

Thankfully, technology has meant that financial solutions have developed multi-layered security systems to ward against intruders. For instance, fintech’s are notorious for not only the provision of innovative technology, but also the creation of technologies which make it harder for criminals, such as blockchain technology. Merchants should consider the financial provider they partner with, to ensure compliance with regulations. Additionally, it’s important to train your teams on how to recognise signs of crime and the main mechanisms of the system you have in place.

What technologies should merchants be considering to optimise protection for their business?

In this day and age with modern technology evolving rapidly, we see a continuous evolution in regulations and compliance which ensure the protection of businesses and their consumers. From a simplistic and quick-solution route, there are things like antivirus, firewalls and email filters to help cleanse your business of scams. More common methods include two-factor authentication and the compulsory use of biometric data to approve payments. Businesses can benefit largely from real-time payment information to spot suspicious behaviours and also use data to continually improve the security around their ecommerce business.

However, with the technology and knowledge of the modern day scammer, it is better to also use data to best understand what areas of fraud your business is most vulnerable to in order to find the right solution. It is a fundamental for any business to now have a secure system with protective technologies in place, and for those with limited time or budgets a third party provider is a winning solution. Fintech providers can simplify your payment problems and close the window of risk against cybercrime through their APIs which can be seamlessly integrated into your business.