Rapidly growing costs across all industries around the world, especially in food and energy, are causing serious hardships for both businesses and consumers. And after a tough 2022, the International Monetary Fund (IMF) has recently revised its estimate of global growth for 2023, forecasting a 2.7% growth rate— which is 0.2% less than the estimate made in July 2022.

The world’s three biggest economies — the U.S., China, and across Europe — will continue to stagnate, according to the IMF. It also notes that, “Overall, this year’s shocks will re-open economic wounds that were only partially healed post-pandemic.”

However, there is always the possibility of positive outcomes amid dire circumstances. Economic hardship can serve as a significant push for innovative new business initiatives. It can also assist in providing established businesses with the necessary push to focus on clear goals and motivate them to adopt the right routines and priorities to become innovative.

Alas, difficult economic conditions unfortunately have a big impact on consumer purchasing. Many consumer-facing businesses will experience stunted growth and fewer transactions than hoped. However, there is one group that will remain active in their buying: fraudsters. Scammers are the one group whose purchasing power is unaffected by economic downturns.

Fraud rates are on the rise

Fraudsters aren’t necessarily buying more during recessions, but because loyal consumers are making fewer purchases, the fraud rate rises as a bigger proportion of all transactions are fraudulent. 

We can already notice an increase in the fraud rate when we compare the second half of 2022 to the second half of 2021. Depending on the region and industry, each organization may experience a different impact. Overall, fraud rates are rising by 2.5% to 5%. If the IMF is correct in saying that the worst is yet to come, then that pattern is very concerning for retailers.

The effects on E-commerce

Successful fraud reduces digital commerce’s revenues. As these are already on the decline, it is more crucial than ever before to deter fraudulent transactions. Here are four concepts to consider: 

1. Know Your Numbers: At this time, executive teams are likely to be paying close attention to KPIs to discover opportunities to minimize costs. Value is added to the organization when fraudulent sales are thwarted. It is crucial for fraud prevention teams to be able to produce numbers that demonstrate that they are reducing fraud and preventing loss for the company.
2. Don’t Throw Friction at Fear: The temptation to establish restrictive rules that increase friction and obstruct a positive customer experience is another pitfall digital commerce leaders could fall into. It makes perfect sense to want to add more security measures to checkout to prevent theft. Yet, making things more difficult for loyal consumers can result in cart abandonment and a reduction in customer lifetime value (LTV). 
3. Do More With Less: Many fraud protection teams are currently asked to do more with less. If the estimates for 2023 come true, this trend will probably continue. Knowing your data points and sharing them frequently (and honestly) helps demonstrate to management that the fraud team requires extra support when times are tough. If you have to “do more with less,” identify coverage gaps that fraudsters can exploit and strive to minimize these risks by thinking creatively and analytically about the issue.
4. Look at Fraud Impact Downstream: Higher fraud rates across several sectors can mean that more products are successfully stolen and, gradually, are sold for less on the resale market. This actually prevents consumers from making in-person purchases and encourages fraudsters to meet the need for cheaper items. Watch what’s happening in your sector for information on the products most likely to be attacked.

How can automated solutions help?

Retailers are faced with a major challenge: prevent fraud without hindering the customer experience.   The economic recession provides an opportunity for organizations to reflect on if their fraud prevention techniques are really serving to boost revenue.

By moving away from legacy rules-based fraud detection rules and fully automating fraud decisions, organizations can ensure that accurate approve/decline decisions are made in real-time. 

For example, real-time decisions promote an excellent customer experience every time. The frictionless shopping helps reduce dropoff at checkout and also encourages customer loyalty for increased LTV. In challenging times when every little bit helps, that impact can add up. The real-time decisions free your fraud team up for more strategic and agile work so that you can adapt quickly to changing circumstances as the economic situation evolves — and the buyer behavior changes along with it.  

Ideally, with this model, fraud attacks are caught fast without impeding legitimate purposes. Fraudsters learn quickly that your site is well protected and back off, making life easier for your fraud team and better for your company. To make things more efficient and easier on your fraud-fighting team during these uncertain times, check out automated solutions that deal with fraudsters in real time.

Dena Barnes is a Strategic Director at Forter. He focuses on relationships between the company and the largest corporations across the globe. Prior to this role, he worked at an A.I. consultancy firm, focused on computer vision as a service. Dena holds a bachelor’s degree in Ancient Roman History, along with a master’s in secondary education.