Synthetic Identities for E-Commerce Frauds

The Global Pandemic due to Covid-19 around the world has set up a new level of e-commerce world for us and everything has shifted to “Digital” now. The transactions are digital to the maximum extent.

Watching this dependence of the whole community over internet has also led to an extreme spike in internet frauds. One such type of fraud is called Synthetic Identity Fraud which we are going to discuss about in this topic today.

For getting their hands over Synthetic Identity frauds, the fraudsters use a fusion of made up and real information of people which may include email addresses, social security numbers, their physical addresses and so on. They use this information with their made-up data for applying to loans, credit cards or to buy goods from any e-commerce website.


What is a Synthetic Fraud?

Unlike the bank frauds where a fraudster theft your real information so as to get financial benefits with fraudulent means, the Synthetic fraudsters not only steals your information, but also make up some fake or imaginary customer identities of people by merging their made-up data and the real data together. And, they do this for deceiving financial institutions and businesses.


How does Synthetic Fraud work?

As we know now, such type of frauds is performed by combining a number of fictional elements or by merging multiple identity elements of real people. For example, a combination of Social Security Number (stolen) with some real address that is generally a P.O. Box.

Fraudsters steal the Social Security Number of either a child or of an elderly individual because these numbers are not taken in use as actively as other details. After this, that scammer will make their credit profile better by making small purchases over months or years. This improved credit score will now help them to make large purchases at a time. And then, they stop applying for credit or loans using this identity.


Impact on the Merchants

With the increasing number of such Synthetic Identity frauds, merchants get affected of course. And, all this can impact them in the following three ways:


  • First of all, the merchants who offer credit accounts can get under a huge loss directly.

  • Secondly, the sellers who sell high ticket products by working with third party can be obligated for such frauds depending on their agreement.


  • Thirdly, such frauds increase the overall costing of business for anyone.


  • And lastly, as such fraudsters steal some extent of the data for real information of individuals, so merchants or retailers should always ensure that the data of their system does not get breached.


Thus, no one should disclose any kind of information about their customer to anyone asking for it or they should not let anyone sneak into their system anyhow.


Combating the risk of Synthetic Identity Frauds

With the continuously enhancing numbers of synthetic frauds in every type of e-commerce industry, businesses should always know that if the customers of their e-commerce business are exactly the person who they claim to be online. This becomes more important when someone is purchasing a quite large good from an e-commerce website.


Howsoever, identity verification of anyone making a purchase is extremely crucial to know whether they are real person or are just claiming to be a real person. E-commerce sector should also go for Digital Verification Technology so as to know one’s authenticity as it can significantly help a business in identifying synthetic frauds.


Locations, devices or individual behavioural patterns are very difficult to imitate. Hence, the key of interpreting such synthetic frauds lies in the ability to detect the digital footprints of a user and comparing these to known individuals with normal behaviours.


Another protective layer for protecting the companies from frauds should include the process of sending a temporary password only on their verified mobile numbers which should be confirmed prior making a purchase. If not for every purchase, such processes should be included for risky or huge purchases or transactions.


Effective models for detection of synthetic frauds include the specific analyzation of customer behaviours which can be done by uncovering the peculiarities and the questionable motif while opening accounts, or trading in all the e-commerce industries.


Such suave and advanced technology is able to do the following:

  • Detection of synthetic identities just while their origination, that is, before any lending decision.

  • Removal of such synthetic identities from pre-qualification or prescreen programs.

  • To decreases the amount of waste efforts regarding back-office collections, such technology can monitor the already registered accounts to disassociate the synthetic identities which already exist in your portfolio.

  • Mollifying the effects of Synthetic identity frauds over populations which may include recent immigrants, new to credit customers or the people who have damaged credit.


Tips and Learnings

E-commerce frauds puts any online business into high risks which should be mollified by using and implementing an advanced system for identifying such identity frauds. Every business should find time and analyse the areas in which such identity frauds most likely occur and how they occur.

Retailers should go through a detailed analyzation and testing of all the relevant transactions and also, they should monitor the controls well.

A constant and timely monitoring schedule can improve a company’s hold on their customer’s authenticity and thus will decrease the frauds. This way they can immediately notice as well as fix the rules which are broken. Therefore, it is recommended that all the employees of a company should “dog-food” the system which will ultimately facilitate a better customer experience.

As we already know how Covid-19 made such frauds relentless. However, the alternative approaches and changing schemes has complicated the detection of fraud even more. Considering any of the factor of this worldwide pandemic, which may include regulatory requirements, economic conditions, and IT source constraints; it becomes difficult to keep up.

So, understanding all about the Synthetic Identity Fraud, you can reduce the risk by implying some prominent tactics discussed.


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