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Growing Fraud Threats for Digital Marketplaces

Published: August 4, 2023 by Kim Le

Trust is the primary factor in any business building a long-lasting relationship, especially when a company operates globally and wants to build a loyal customer base. With the rapid acceleration of digital shopping and transactions comes a growing fraud landscape. And, given the continual increase of people wanting to transact online, marketplace companies – from ecommerce apps, ridesharing, to rental companies – need to have ideal strategies in place to protect themselves and their customers from fraudulent activities.

Without ideal risk mitigation or comprehensive fraud and identity proofing strategies, marketplaces may find themselves facing the following:

  • Card-not-present (CNP) Fraud: As online shopping increases, customers can’t provide a credit card directly to the merchant. That’s why fraudsters can use stolen credit card information to make unauthorized transactions. And in most cases, card owners are unaware of being compromised. Without an integrated view of risk, existing credit card authentication services used in isolation can result in high false positives, friction and a lack of card issuer support.
  • Unverified Consumer Members, Vendors, Hosts & Drivers: From digital marketplace merchants like Etsy and Amazon, to peer-to-peer sharing economies like AirBnB, Uber and Lyft, the marketplace ecosystem is prone to bad actors who use false ID techniques to exploit both the platform and consumers for monetary gain. Additionally, card transaction touchpoints across the customer lifecycle increases risks of credit card authentication. This can be at account opening, account management when changes to existing account information is necessary, or at checkout.
  • Buy Now, Pay Later (BNPL) Muling: While a convenient way for consumers to plan for their purchases, experts warn that without cautionary and security measures, BNPL can be a target for digital fraud. Fraudsters may use their own or fabricated identities or leverage account takeover to gain access to a legitimate user’s account and payment information to make purchases with no intent to repay. This leaves the BNPL provider at the risk of unrecoverable monetary losses that can impact the business’ risk tolerance.
  • Forged Listings & Fake Accounts: Unauthorized vendors that create a fake account using falsified identities, stolen credit cards and publish fake listings and product reviews are another threat faced by ecommerce marketplaces.

These types of fraud can happen without the vast data sources necessary to assess the risk of a customer and authenticate credit cards among other fraud and identity verification solutions. By not focusing on establishing trust, fraud mitigation management solutions and identity proofing strategies, businesses can often find themselves with serious monetary, reputational, and security qualms.

Interested in learning more? Download Experian’s Building Trust in Digital Marketplaces e-book and discover the strategies digital marketplaces, like the gig economy and peer-to-peer markets, can take to keep their users safe, and protected from fraudulent activity. For additional information on how Experian is helping businesses mitigate fraud, explore our comprehensive suite of identity and fraud solutions.

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In today’s digital lending landscape, fraudsters are more sophisticated, coordinated, and relentless than ever. For companies like Terrace Finance — a specialty finance platform connecting over 5,000 merchants, consumers, and lenders — effectively staying ahead of these threats is a major competitive advantage. That is why Terrace Finance partnered with NeuroID, a part of Experian, to bring behavioral analytics into their fraud prevention strategy. It has given Terrace’s team a proactive, real-time defense that is transforming how they detect and respond to attacks — potentially stopping fraud before it ever reaches their lending partners. The challenge: Sophisticated fraud in a high-stakes ecosystem Terrace Finance operates in a complex environment, offering financing across a wide range of industries and credit profiles. With applications flowing in from countless channels, the risk of fraud is ever-present. A single fraudulent transaction can damage lender relationships or even cut off financing access for entire merchant groups. According to CEO Andy Hopkins, protecting its partners is a top priority for Terrace:“We know that each individual fraud attack can be very costly for merchants, and some merchants will get shut off from their lending partners because fraud was let through ... It is necessary in this business to keep fraud at a tolerable level, with the ultimate goal to eliminate it entirely.” Prior to NeuroID, Terrace was confident in its ability to validate submitted data. But with concerns about GenAI-powered fraud growing, including the threat of next-generation fraud bots, Terrace sought out a solution that could provide visibility into how data was being entered and detect risk before applications are submitted. The solution: Behavioral analytics from NeuroID via Experian After integrating NeuroID through Experian’s orchestration platform, Terrace gained access to real-time behavioral signals that detected fraud before data was even submitted. Just hours after Terrace turned NeuroID on, behavioral signals revealed a major attack in progress — NeuroID enabled Terrace to respond faster than ever and reduce risk immediately. “Going live was my most nerve-wracking day. We knew we would see data that we have never seen before and sure enough, we were right in the middle of an attack,” Hopkins said. “We thought the fraud was a little more generic and a little more spread out. What we found was much more coordinated activities, but this also meant we could bring more surgical solutions to the problem instead of broad strokes.” Terrace has seen significant results with NeuroID in place, including: Together, NeuroID and Experian enabled Terrace to build a layered, intelligent fraud defense that adapts in real time. A partnership built on innovation Terrace Finance’s success is a testament to what is  possible when forward-thinking companies partner with innovative technology providers. With Experian’s fraud analytics and NeuroID’s behavioral intelligence, they have built a fraud prevention strategy that is proactive, precise, and scalable. And they are not stopping there. Terrace is now working with Experian to explore additional tools and insights across the ecosystem, continuing to refine their fraud defenses and deliver the best possible experience for genuine users. “We use the analogy of a stream,” Hopkins explained. “Rocks block the flow, and as you remove them, it flows better. But that means smaller rocks are now exposed. We can repeat these improvements until the water flows smoothly.” Learn more about Terrace Finance and NeuroID Want more of the story? Read the full case study to explore how behavioral analytics provided immediate and long-term value to Terrace Finance’s innovative fraud prevention strategy. Read case study

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