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ThreatMetrix Addresses Five Channels of Online Fraud for the Back-to-School Season

Posted August 17, 2011

As Online Purchases Become More Prominent for Back-to-School Shopping, Merchants Must Address Today’s Faces of Fraud

LOS ALTOS, CA – August 18, 2011 – ThreatMetrix™, the fastest growing provider of fraud prevention solutions that do not require personally identifiable information (PII), reveal five channels prone to online fraud during the back-to-school shopping wave.

The back-to-school timeframe represents one of the largest shopping surges in the U.S. This year, consumers are expected to spend more than $68 billion on books, apparel, paper, pencils, backpacks and other school supplies, according to the National Retail Federation. Of that, an increasing amount is likely to be spent with online retailers. Internet Retailer cites that 31.7% percent of consumers buying supplies for K-12 students will shop online this year, up from 30.8% last year. And for college purchases, 33.4% of consumers are planning to purchase on the web, up from 28.6% in 2010.

“It’s no surprise that retailers, especially those in the education sector, see a peak in transactions throughout August and September, as consumers are purchasing for back-to-school and even pre-holiday,” said Alisdair Faulkner, chief products officer, ThreatMetrix. “In this high-traffic season, it’s important for merchants to take preventative measures in order to protect their customers, and themselves, from being victims of online fraud.”

Five Channels of Online Fraud for the Back-to-School Season

1. Online Purchases: Goods commonly purchased during the back-to-school season range from locker gear and dorm furniture, to fall clothing, textbooks and laptops. Traditionally these were items commonly purchased in-store, but as e-commerce has continued to expand at a rapid pace, online purchasing has become easier; in turn, translating to a higher potential for fraudulent online activity.

A solution to this: Retail sites can integrate alternative payment options into their checkout process. One company, BillMyParents, partners with retail sites to provide a safe way for teens and young adults to shop online. The site integrates a “BillMyParents” payment button next to each product or in the shopping cart. Selected items are immediately emailed to parents, who can easily manage and approve requests. BillMyParents uses the ThreatMetrix™ Cloud-Based Fraud Prevention Platform to combat fraud in common scenarios such as verifying new accounts, authorizing payments and transactions, and authorizing user logins. These are common fraudulent scenarios for retail sites not using alternative payment options as well.

2. Online Book Rentals: Textbook rental sites are becoming increasingly popular, providing a convenient and cost-effective way for parents and students to afford textbooks each semester. These rental sites must protect against fraudsters who might use a fake credit card to rent books, and then resell those books for individual profit.

3. Banking: College students are oftentimes opening first-time banking and loan accounts to prepare for the expenses that come along with going back to school. Credit card companies, in particular, use this window of time to ramp up efforts to target college campuses. According to a recent ThreatMetrix consumer survey, 88% of consumers said they would not do business with banks or credit card and online payment processors if they had doubts about their security measures. While the financial services industry is widely targeted by fraudsters 24/7, it’s important to have fraud prevention solutions in place as traffic heightens during the back-to-school season.

4. Social Media: In preparation for the new school year, students are often leveraging social networks and joining online groups in anticipation of upcoming classes and extra-curricular activities. However, fraudsters also like to leverage these same networks to send spam, infect computers or test stolen credit cards for available balances.

5. Gaming: Online gaming is often popular when students return to school after spending the summer months outside. While gaming is often viewed as a simple social activity, it’s an industry that is far from protected against fraudsters. For example, there has recently been a surge of targeted breaches on everything ranging from small online games to large networks like Sony’s PlayStation.

Online merchants across a variety of industries can address these faces of fraud in preparation for one of the most prominent buying seasons all year. “Merchants must leverage smarter fraud prevention technology in order to differentiate between the good and bad buyers,” added Faulkner.

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About ThreatMetrix

ThreatMetrix®, The Digital Identity Company®, is the market-leading cloud solution for authenticating digital personas and transactions on the Internet. Verifying more than 20 billion annual transactions supporting 30,000 websites and 4,000 customers globally through the ThreatMetrix Digital Identity Network®, ThreatMetrix secures businesses and end users against account takeover, payment fraud and fraudulent account registrations resulting from malware and data breaches. Key benefits include an improved customer experience, reduced friction, revenue gain and lower fraud and operational costs. The ThreatMetrix solution is deployed across a variety of industries, including financial services, e-commerce, payments and lending, media, government and insurance.

For more information, visit www.threatmetrix.com or call 1-408-200-5755. Join the cybersecurity conversation by visiting the ThreatMetrix blog, Twitter, LinkedIn and Facebook pages.

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Dan Rampe
ThreatMetrix
Tel: 650-417-6122
Email: drampe@threatmetrix.com

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