Blog / Machine Learning

How has online payment fraud against grocery platforms evolved?

Online payment fraud is one of the biggest threats facing grocery merchants. And it’s only gotten worse. How are fraudsters using the cost of living crisis to take advantage of your business?

07 September 2023

How has online payment fraud against grocery platforms evolved?


Fraudsters are constantly finding ways to commit fraud and slip under your radar. What's more, bad faith actors are using the dark web to communicate and share methods.

Over 60% of shoppers see fraud as an inevitable risk of shopping online. And online payment fraud is the fraud threat that won't seem to go away. Unfortunately, the issue has only been exaggerated by the cost of living crisis. But why should your grocery business be particularly concerned?

We’ll cover the methods fraudsters are using to hit the grocery industry and how your business can tackle them…

How are scammers committing online payment fraud?

They’ve upgraded their phishing scams

Everyone has gotten a dodgy email at least once. The signs tend to be obvious: email addresses and domain names that don’t match, grammar and spelling errors, etc.

The problem is that fraudsters are getting smarter. And they’re exploiting your customers’ financial anxieties by posing as genuine merchants.

Supermarkets have been getting spoofed in fake online ads claiming to offer deals and discounts. Asda and Morrisons customers were sent texts claiming their orders were on the way and all they had to do was click a link to track their purchase. In both cases, these customers were pushed to phony third-party where their credentials were stolen.

Tactics like using compromised email domains to send phishing emails help them avoid getting labelled as spam. The Asda and Morrison ‘smishing’ scammers told customers that there was a ‘delivery note’ for their order to further convince them to click the link.

They’re using your stores for card-testing fraud

Grocery stores are seen as easy avenues for card-testing fraud because of the low friction checkout process. Fraudsters can put in an order using a compromised credit card and see if it goes through to verify if the card can be used for more purchases.

Why is online payment fraud a threat to your business?

You lose revenue

Chargebacks are a major fallout from online payment fraud. When a customer notices a charge they didn’t make, they’ll inevitably dispute it with their bank. Chargeback fees can cost anywhere from $20 and $100, depending on the agreement you’ve made with your enquirer. You also lose expenses in transaction fees, operational overheads, and marketing costs.

You could get penalized

Too many chargebacks can result in your business getting penalized. Visa and Mastercard both have ‘chargeback thresholds.’ Payment service providers (PSP) apply restrictions and added fees if your business exceeds these limits. The worst case scenario is you can lose the ability to process credit card payments altogether.

Why is online payment fraud tricky to combat?

You don’t want to disrupt customer journeys

More security steps may seem like a quick-win to ensure that a customer is who they say they are. But this can be incredibly frustrating to a genuine customer. Even to the point of them abandoning their carts.

With more competitors in your space to reckon with than ever, you don’t want to give customers any reason to leave!

You risk penalizing genuine customers

A risk threshold that’s too high could open your business to more fraud. But a fraud threshold that’s too low can end up blocking genuine purchases. Online merchants have called out that false positives have proven to be a big problem because it loses them legitimate sales.

How can you tackle online payment fraud?

Monitor customer activity

A fraudster is highly unlikely to have the same personal information as the actual account holder. Suspicious behavior like a change in delivery address could point to a fraudster trying to pull a fast one.

Understand how a genuine customer behaves

Fraudsters quickly become easier to spot when you know how genuine customers interact with your business. Machine learning models can quickly pick out the differences and similarities between behaviors and use this to predict fraud in future transactions.

Talk to your peers

Fraudsters rarely act alone and tend to target one business after another. Communicating with other merchants helps establish fraudulent patterns and trends more efficiently.

Visualize your data

Graph networks help map out the links and connections in your customer database, quickly uncovering any cases of online payment fraud. For example, fraudsters tend to create new accounts to make new orders with stolen card details. So you may see one device being used to open lots of new accounts in a short space of time, as below.

A graph network can visualize this in an easy-to-understand way that helps your fraud teams recognize fraud attacks faster.


Fight the rise of fraud against online grocery

More than half of UK shoppers go online to buy at least some of their groceries, while 16% do so for all or most of their groceries. You need to ensure that you business and bottom line are protected as more customers move their regular shopping online.

Our latest eBook on the state of fraud in online grocery covers everything you need to know on the biggest fraud risks and strategies you should use to combat them. Find out more by downloading the eBook here.

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