Stay secure this season: Strategies to tackle the surge in payments scams
The digital world has made it easier than ever to complete holiday shopping—with just a few quick taps on a mobile device or computer, you can purchase anything from around the globe and have it delivered to you faster than ever before. However, behind the festive cheer and online convenience lurks an alarming rise in scams and fraud.
Understanding the growing threat
Authorized merchandise scams occur when individuals or businesses pretend to sell goods or services that are either non-existent or of poor quality.
In one of the largest global scams, 800,000 people in Europe and the U.S. lost a total of $55 million when they were tricked into sharing card details and other sensitive personal data with a vast network of fake online designer shops. (1)
In the U.S. alone, people lost $12.5 billion to internet scams in 2023, according to the FBI. (2) In the UK, nearly 1.4 million cases of fraud were reported in the first half of 2023—an alarming rate of one theft every 12 seconds. (3)
Working to prevent scams
Understanding the issue begins with building a strong foundation of facts. Mastercard requires issuers to report all fraudulent transactions, with Reason Code 56 (Manipulation of Cardholder) which is best for a situation where the cardholder was misled or manipulated into these scams. And, in October 2024, additional fraud types and subtypes became available to support more specificity in the scam reporting data. This enhanced reporting strengthens tools like Mastercard’s Fraud Center, the Decision Intelligence Suite and the Scam Protect Program, to better protect the entire ecosystem.
Additionally, Mastercard is working closely with card issuers to provide consumers and the broader industry with tips on how to recognize scam merchants. Several large financial institutions have proactively established internal anti-scam working groups to combat fake websites and scams, aiming to address the growing number of disputes from cardholders over undelivered purchases. Additionally, the U.S. Federal Reserve Bank have formed a cross industry working group to establish more consistency around scam definition and classification. In 2024, the Federal Reserve published the ScamClassifier℠ (4) model to deliver a consistent, centralized resource in identifying, tracking and mitigating scams.
The fight continues
There’s an opportunity to do more and maximize the broader industry’s efforts. Collaboration is essential to the fight against scams. By sharing insights and defining joint actions that protect both businesses and consumers, the industry will continue to stay ahead of scammers, while reinforcing trust in our digital world.
SOURCES:
- One of world's 'largest online scams' catches over 800,000 European shoppers, Irish Examiner, 2024
- Internet Crime Report, FBI, 2023
- UK consumers lose £580m to fraudsters in first half of 2023, figures reveal, The Guardian, 2023
- Federal Reserve, FedPayments Improvement, 2024
