While AI has penetrated our lives in most technological aspects, we must acknowledge its dark side and prominent role in online identity fraud.
Most industries are slowly facing the implications of deepfakes and password hacking; eCommerce is no different.
Identity theft in eCommerce makes up more than 21% of all fraud reports.
AI plays a crucial role in preventing identity fraud, but it also works against it and can aid hackers in committing identity fraud in online stores.
To understand it better, let’s check out what AI identity fraud is in eCommerce and the steps you can take to reduce such security threats.
AI-based fraud includes fraudulent activities and scams that are executed with the help of AI technologies. Fraud is conducted by AI whenever a fraudulent activity is facilitated with the help of technologies that stimulate human intelligence and problem-solving skills in machines, like speech recognition and machine vision.
Source: Helpnet Security
Identity fraud is the most popular form of AI fraud because of the ease with which one can manipulate a real identity, replicate an actual user, and conduct fraudulent activities under the guise of a real person. For online businesses, such manipulation can pose a serious risk to payment processing and brand reputation.
While AI plays a significant role in combating security risks and fraud in eCommerce, there are places where it is used to breach user privacy, leading to identity fraud. Some of the most common types of identity fraud by AI include:
Generative AI tools help disabled users use their natural voices or improve productivity through automatic text or email creation. Still, this same technology is used to create deepfake identities to conduct fraudulent activities in eCommerce.
With a combination of face-swapping technologies, large language models, and image-generation applications, hackers don’t even need sophisticated skills to create impressive deepfakes. They can easily use these deepfakes, attack biometric systems, gain access to user accounts, and commit identity theft.
Cybercriminals can also use deepfakes to impersonate legitimate customers or employees to manipulate financial transactions and cause reputational damage and loss. Deepfake-generated content can even produce false product reviews and manipulate customer sentiment.
Source: Regula Forensics
Cybercriminals can leverage AI to enhance password-cracking algorithms. It makes it easier for hackers to crack passwords with accurate and quicker guessing. This poses a significant threat to the security of online accounts and systems. It calls for strengthening the login and multi-factor authentication processes to ensure accurate logins.
While social engineering fraud has been around for a while, it’s becoming more prominent with the rise of AI and the ease with which it can be used to execute identity theft in eCommerce. For example, eCommerce sites deploy realistic chatbots on websites for personalized recommendations and customer support.
These chatbots act like human agents who have real conversations with users. However, this same technology is implemented by hackers who convincingly impersonate trusted individuals and representatives to manipulate victims into sharing personal information, passwords, and financial fraud.
Hackers also indulge in phishing attacks using AI, sending legitimate emails and messages to trick users into disclosing personal information to misuse it. Using voice communication, they can impersonate legitimate representatives and entities to extract confidential data over the phone.
As AI-based identity fraud threatens the future of eCommerce security of online businesses, many small and enterprise companies are looking for ways to combat the impact of identity fraud and prevent it altogether in the first place. Below are some of the top ways brands can take security measures against identity fraud resulting from AI.
While you may already have some security protocols that help you address minor security issues that disrupt your business operations, you need to have advanced security practices that help you deal with identity threats from AI.
Foster a security-conscious culture within your organization and train your employees to identify fraudulent activities dealing with identity thefts. Along with relying on security professionals to mitigate the risks by integrating technical security tools, train your employees to act as a natural firewall that enhances technical security.
While you’re at it, also optimize your website to free it from AI-based security attacks. Often, security errors on your website can become a breeding ground for fraudsters to extract data and commit identity threats using the same.
Online businesses must set fraud detection rules and filters that help them promptly identify malicious activities. These models can analyze transactions and user behavior, and you can regularly update them to adapt to changing techniques in identity fraud. Some of the fraud detection models you can use are:
Many eCommerce platforms have fraud detection tools built into their software. For example, Shift4Shop directly integrates with Kount — an AI-based fraud detection service that automatically monitors fraudulent transactions.
Most eCommerce AI-based identity fraud occurs at the payment stage, where hackers use unauthorized information to manipulate customer transactions. You can monitor transactions and user behavior to take action in real time if you see any suspicious activity.
You can also leverage eCommerce monitoring tools on the checkout page to prevent operational errors and make your system vulnerable to security threats. Real-time monitoring tools also help ensure compliance with regulatory standards and recovering revenue through data protection and privacy, financial auditing, and fraud prevention.
Some of the ways you can monitor transactions are:
A digital identity is a virtual representation of a person on the Internet. It covers the attributes and information that uniquely distinguish them online, such as login credentials, biometric data, email addresses, etc. A digital identity outlines who can access what, under what circumstances, and for how long.
With AI, it is easier than ever for hackers to fake faces, voices, and biometrics. Having digital identities with just personal information like usernames and passwords is already easy for hackers to break. Advanced digital identity tools help you fix this gap of insecure credentials and consumer-consented identity verification to prevent security hacks and gain control of user accounts.
Protecting this identity is a must to ensure cybersecurity and prevent identity fraud, as digital identity contains the authorization and permissions to interact online. Digital identity tools help eCommerce merchants quickly verify their customers’ identity to reduce fraud and increase customer trust.
Many online businesses are adopting multi-factor authentication methods for securing login information and passwords. Some common methods of multi-factor authentication include the customer taking one additional step after entering login credentials, such as:
Implementing MFA can significantly help you reduce identity fraud, especially those occurring from hacking passwords and login credentials. When you make login more personalized and tailored to a single user, it becomes difficult for fraudsters to access user accounts.
It will help you improve identity fraud by improving digital security and reducing the cost of fraud and the burden of resolving customer complaints. It also improves your brand’s reputation in the eyes of consumers since it shows you care about their security and that your site is secure enough to make a purchase.
Many brands in other industries also opt for frictionless multi-factor authentication methods that uplift the user experience. Customers don’t have to take any additional steps, but the identity check is automatically performed when the user’s mobile device is in their possession. Fraudsters cannot access user accounts if they don’t physically possess the users’ mobile devices.
Making security a part of your culture involves more than integrating the right tools and running security audits. You should also collaborate with other businesses to share data and insights on fraud schemes, trends, and best practices. It also helps you stay ahead of the emerging patterns.
For example, you can share information with other organizations, credit card providers, and financial institutions to collectively look out for cybercriminal activities and identity fraud incidents. With collaborative data, shared intelligence, technology, and proactive measures, even if a single fraudulent activity occurs, it can be flagged network-wide and warn other merchants of the same.
Ultimately, information sharing helps with early threat identification, faster threat response, and enhanced customer trust. However, to facilitate this, you must expand your network to drive cross-industry fraud detection securely.
Finally, you must adhere to the security protocols and comply with relevant data protection and privacy rules. Some basic steps you can take to improve your security against identity fraud are:
AI can have multiple benefits and make our lives easier with mundane tasks. But with that also comes the risk of leveraging AI for not-so-legitimate purposes. If security professionals are getting smarter, so are cybercriminals. The landscape of identity fraud is evolving, and basic security measures are not enough to combat it.
You can use this opportunity to advance your security with AI and instead use it to prevent AI-powered security attacks and identity fraud in eCommerce. Identify relevant threats and incorporate the abovementioned strategies in your existing response framework. By doing so, you can better protect customer data, improve customer trust, and build brand loyalty.