Customer Fraud Protection: How to Protect Your Customer Data Online
According to the Federal Trade Commission, customers lost more than $5.8 billion dollars to fraud in 2021 — a rise of more than 70% in 2020. With the value of internet fraud going up, and fraudsters using increasingly sophisticated technology, businesses and customers alike are becoming more vulnerable to scams and data theft.
Businesses are responsible for protecting customer data. Find out how to secure your data and prevent your customers from becoming victims of consumer fraud.
What is customer fraud protection?
Customer fraud protection involves putting the right security measures in place to minimize the risk of identity theft and other types of fraud. This includes all kinds of information security measures, such as:
- Online security solutions, such as anti-bot systems, web application firewalls, and antivirus software
- Appropriate security policies
- Data encryption
- Physical security measures.
All businesses that store and process any kind of personally identifiable data need to ensure they have the right security systems in place. This list isn’t exhaustive; your business may need additional security measures, depending on the sensitivity and type of data you store.
Findings from the Federal Trade Commission 2021 fraud report
The 2021 Data Book, published by the FTC, outlines some key fraud statistics:
- Fraud losses totaled $5.8 billion in 2021
- The top five fraud categories were imposter scams; online shopping; prizes, and lotteries; internet services; and business opportunities
- Imposter scams caused losses worth $2.3 billion — more than double the value in 2020
- Online shopping fraud accumulated losses of $392 million, up from $246 million the previous year.
These findings show that traditional security measures are failing to protect customers from fraud. Globally, there’s a growing need for dedicated security systems to tackle increasingly sophisticated fraud threats.
Why your customers may be susceptible to fraud
With online fraud on the rise, it’s important to understand why identity theft occurs, and why consumers are increasingly vulnerable to scams. This is due to a number of factors:
- Weak security measures
Insufficient online security is by far the biggest cause of data theft. Many businesses still rely on security practices like CAPTCHA and firewalls, which have been around for almost three decades. These measures are ineffective against automated threats and sophisticated scams, leaving customers at risk of all types of fraudulent transactions.
- Increasing internet usage
Online business was growing before the Covid-19 pandemic hit — but this catapulted the world into a new digital age. With more people than ever using the internet, data is becoming more valuable, giving cybercriminals a huge incentive and opportunity to commit fraud.
- Poor password hygiene
The average person has 100 passwords. That’s a lot of complex passphrases to remember. As a result, many people reuse their passwords across multiple accounts, leaving them susceptible to automated attacks like credential stuffing.
- Lack of information security knowledge
Phishing and whaling attacks take advantage of people’s lack of knowledge about online safety. If people can’t recognize a phishing email, they’re more likely to reveal personal or financial information to attackers, who can then use this to commit fraud.
Common types of online fraud
The most common types of fraud committed online include:
- Account takeover
- Identity theft
- Credit card fraud
- Gift card and loyalty point fraud
- False fraud claims (usually following a successful account takeover)
The repercussions for customers range from stress and anxiety to significant money loss and damaged credit reports. Businesses can also suffer, with large fines and penalties levied against companies who fail to safeguard their customer data. You may also be penalized by payment processors and regulators. So putting the right fraud protection in place should be a priority for all business leaders and site administrators.
How to protect your customer data online
Here’s what you need to do to ensure you have the best possible online fraud prevention:
- Learn about modern fraud techniques
Knowing how attackers gain access to data is the first step in combating it. Many modern scams and data breaches are committed by bots, which are automated programs designed to attack your website, app, or API. Learn more about bad bots and how they enable attackers to commit fraud on your site.
- Enhance your security
When you know which fraud threats your business is facing, you can put the right measures in place to block them. Traditional security measures like web application firewalls need constant monitoring and updating to ensure they’re effective against recently discovered threats — and even then, they can’t defend against unknown automated bot attacks.
Dedicated solutions like bot mitigation software automatically protect your site against bot threats. Advanced systems can detect unknown and highly sophisticated bots, giving you optimal data protection.
- Only use suppliers who meet your information security requirements
Allowing vendors with lax security protocols to process your customer data is negligent. As part of your due diligence, you should assess each potential supplier’s security measures and ensure they’re as effective as your own.
- Train your staff
Run regular training sessions to ensure your staff knows how to recognize common threats, such as phishing and whaling attacks. These can be delivered by email, SMS, or even social media — so staff should be hypervigilant about clicking links and sharing sensitive information online, even if emails appear to be from official websites.
Learn more about automated bot threats
Bots are increasingly responsible for some of the biggest fraud threats online. Learn more about what bots are and how to keep your business safe from cyberattacks.
