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Account takeover fraud: retailers lose twice

Account takeover fraud is an increasing threat to retailers and their customers. How do we combat it?

Imagine this: a seemingly innocent customer walks into a retail store. Equipped with a certified copy of their ID, they explain that they have lost their store card and would like a new one. The person behind the counter checks the name and birth date against the certified ID copy, confirms they match, and hands over the new store card.

And just like that, account takeover fraud has cost the company and the customer.

In most cases, the real account holder won’t know until much later. Often when credit scores have already tanked, and thousands have been accumulated in debt.

The gap

Here exists a gap between the customer and the business. A gap that fraudsters are wholly taking advantage of. The salesperson is not empowered to verify that the customer is who they say they are, beyond a doubt.  This coupled with the fact that store cards are not often chip and pin enabled leaves anybody with a store account vulnerable to account takeover fraud and any retailer who offers credit, vulnerable to losing twice.

When a client returns to the store after having their account stolen, they are most likely going to have a tarnished view of the brand, as well as demand their money back. The store will have to refund the money and they will be out of pocket for the goods that have already been stolen by the fraudster. The retailer loses twice. Not to mention, the potentially lost customer.

Account takeover fraud trends

Account takeover fraud has drastically increased since the inception of Covid-19. With the economic repercussions, many people lost their jobs, creating an increased need to extend credit and a lessened means to pay back the credit. In general, credit scores were declining. With lower credit scores all around, fraudsters are not able to extend as much credit on their victims’ names. Therefore, account takeovers became a more popular type of fraud. It is much easier for the fraudster to take over an existing account than to try and apply for new credit.

Retailers lose twice in account takeover fraud

Retailers are not often seen as a victim when account takeover fraud takes place. This is simply not true. The retailer loses at least twice.

At first, the retailer may be celebrating because they are seeing increased revenue and month-on-month growth. However, picture this:  as a retailer, you’re at financial year end, you declare tax and then it comes to light that half of your revenue fraud can be accredited to account takeover fraud. You as the retailer, are now liable to pay chargebacks. This hits your stock, revenue, and profit line.

Driving citizen comfort  

The more that account takeover fraud takes place, the more customers are targeted, and the wearier the market becomes. This, in time, will see consumers demanding even more responsibility and security from retailers. The extra weary consumer may only take their business to the most secure retailers. Driving citizen comfort must be a top priority for retailers moving forward.

As fraudsters get smarter and more tech-savvy, so must retailers.

Secure Citizen aims to equip retailers to fight account takeover fraud and become more responsible by using biometric verification.

How does it work?

At any touch point in the consumer’s journey (account origination, issue of card, increasing credit limit, change in delivery address or details, account closure, or when a purchase is made) the customer will be asked to verify their identity using their biometrics (face, voice or fingerprint). A card can be stolen. A pin can be stolen. A face cannot. This identity is verified against a golden source. Secure Citizen creates a digital highway between golden sources (DHA, SAFPS, Nation Immigration Information System (NIIS) and CIPC).

If the identity is returned verified, the retailer can be more certain than before that they are doing business with an individual who is who they say they are. However, the identity may return flagged as a known fraudster, a known victim or simply not a match. The retailer then has the power to eliminate potential account takeover fraud. This also allows the retailer to show that they are a responsible business.

The way forward for retailers

Retailers may find themselves faced with not only the threat of account takeover fraud but pressure from the consumer to be responsible sooner than anticipated. Digital identity verification alleviates the risk and promotes responsible businesses in a practical, frictionless, affordable way. While historically digital identity may have been expensive and impractical to implement, Secure Citizen makes digital identity easy and affordable.

In a time when fraudsters are not breaking in, but logging in, retailers must strive to lock them out, and close the gap between consumer and company.

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Let's make it hard for fraudsters and easy for citizens.

Picture of Dalene Deale

Dalene Deale

Dalene Deale brings extensive experience in the financial sector, having held a variety of roles in business analysis, process engineering, corporate acquisition and fintech management. Using her passion, knowledge and expertise, Dalene previously oversaw TransUnion’s FinTech strategy, assisting them throughout their various stages of growth. Now, as the Executive head at Secure Citizen, her passion and driving force is to “empower every African with a secure, digital identity.”

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