Rate of online fraud attacks has soared in recent months
The U.S. has seen a big spike in the rate of online fraud attacks since October 2015, according to a recent report from two leaders in the payments, commerce and fraud industries.
The most recent Global Fraud Attack Index from Forter, a fraud prevention firm, and PYMNTS, a media company focused on the payments and commerce industry, revealed soaring online fraud rates since October 2015.
According to the report, when compared to the rate of fraud reported in the third quarter (Q3) of 2015, fraud in the fourth quarter (Q4) of 2015 rose 11 percent. Even worse, if the rate of online fraud reported in Q4 2015 is compared to the rate reported first quarter (Q1) of 2015, the result is an astounding 215 percent rise. In Q4 2015, there were 27 fraud attacks for every 1,000 transactions online, and between Q4 2015 and Q1 2016, the rate of online fraudulent attacks more than quadrupled for digital goods.
All told, $4.79 out of every $100 of online sales is at risk in the latest data, a 150 percent increase from Q1 2015. In digital goods, the at-risk dollar amount rises to $7.77 out of every $100 spent and in luxury goods, the dollar amount increases to $8.62/$100.
— PYMNTS (@pymnts) April 19, 2016
Why October 2015? The move to smart, chip-enabled cards
So, all things considered, what significant event happened in October 2015 that could have contributed to this rise?
Many U.S. retailers moved to EMV chip-enabled credit and debit cards -- also referred to as smart cards, chip cards, and IC cards -- in October. And many of those retailers that didn't switch in October moved that direction in the following months. With the move to chip cards, fraud rates in retail, brick-and-mortar stores moved in a positive direction since October. But, as theory has it, the unintended side effect of this enhanced security has been an increase in online fraud in the same time period.
Botnets to blame
Botnets are to blame for a large percentage of fraudulent online transactions, the report noted. The term "botnet" is a combination of the words robot and network and is used to refer a number of similar but different types of activity online. In this instance, the term is referring to some type of automated computer program that is able to complete a fraudulent purchase online without any (or very little) human interaction.
Wozniak compares cyber attacks to atom bombs
Cyber security is a big topic around the globe right now, and many tech leaders are joining the chorus that is collectively warning the public about the increasing danger that cyber attacks present. Apple co-founder Steve Wozniak, in an interview on Australian TV news show Lateline, called cyber security the "greatest threat we have now" and compared it atom bombs.
"Cyber security is the greatest threat we have now. We used to fear the atomic bomb when I was young. You'd walk home from school and sirens would go off for a test on every corner ... and now we fear all the cyber attacks and hacking. What's the next one we're going to hear about? Is one going to come close me? Is it going to hit me? Could they really take out our electrical system, turn off our Internet, how can it go? And it's getting worse and worse year by year, not better and better." -- Steve Wozniak on Lateline