Chargeback Prevention

Gig Economy Fraud Outsources Cybercrime

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The gig economy has transformed the way people shop for meals, get around town, and earn extra income. There’s a lot of potential to unleash when you have the ability to use an app or website to immediately connect with available gig workers, and unfortunately, fraudsters have realized this as well.

An illicit industry of gig economy fraud has taken shape, with workers—often unknowingly—enlisted into various schemes to facilitate or conceal online fraud. What exactly is involved in gig economy fraud, and what are the best ways for merchants to avoid being victimized by it?

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The term “gig economy” describes the current framework of temporary or task-specific jobs performed by part-time or freelance workers, usually with an organization providing some tech-based platform where workers can easily connect with the people who want to hire them.

This type of work has become increasingly popular, with 36% of American workers participating in some capacity. While the most widely-used gig economy apps—Uber and DoorDash, for example—serve very specific functions, there are other gig economy platforms, like Fiverr or TaskRabbit, where individuals can be hired for broader, more open-ended types of labor.

What fraudsters have discovered is that when they can hire affordable freelance workers from anywhere on the globe, they can circumvent many of the obstacles that might otherwise derail their schemes.

These days, ecommerce fraud operations are often well-organized and well-funded, and they’re always looking for ways to increase their success rates and maximize their profits. Merchants must contend with the fact that many fraudsters are finding out that hiring freelance help is a good investment.

What is Gig Economy Fraud?

While there are scams that are entirely reliant on certain aspects of the gig economy—fraudsters hiring freelancers and then charging back their payments after the work is completed, for example—in this context it describes situations in which gig workers are being used to support, facilitate, or otherwise improve the efficacy and profitability of online fraud.

The type of fraud you see in gig economy fraud isn’t likely to be anything new or different, it’s just that the fraudster has access to a pool of labor that can increase their odds of success.

The dark web may have its own networks of freelancers and gig workers, but fraudsters don’t always have to search out illicit markets to find the workers they need, and the workers don’t always know they’re being asked to do anything wrong or illegal.

Fraudsters are often careful to describe and assign tasks in such a way that the worker has no reason to suspect that they’re being asked to engage in criminal activity. Of course, not everyone will need that veneer of deniability, and fraudsters may also take on freelance helpers who are more intimately involved in the clearly-illegal side of the operation.

With security flaws and data breaches making so many sets of stolen payment credentials available, fraud has sadly become a scalable enterprise in which the ability to outsource some of the more tedious and time-consuming aspects can result in greater success and higher profits.

What Kind of Tasks Do Fraudsters Assign to Gig Economy Workers?

Download the eGuide, 4 Reasons to Hire a Chargeback Management CompanyThere are many different roles that gig workers can play in an online fraud scheme, often without knowing the true purpose of their activities.

At the most basic level, gig workers can handle some of the “administrative” work of online fraud: submitting requests for refunds, filling out CAPTCHA forms, placing transactions for card testing.

One of the most common uses for gig workers, however, is as “mules” for receiving and moving packages. Online credit card fraud presents two major challenges for fraudsters. First, they have to find a card that still works and a merchant whose anti-fraud protections won’t block their transaction.

Once that challenge is solved, they still have to find a way to extract some value out of whatever it was they purchased from the merchant—few fraudsters are foolish enough to have an illegally-purchased order shipped to their own mailing address.

If the fraudster can hire a mule located near the cardholder, however, they can have the order shipped to the mule’s address (which will be less likely to arouse suspicion than an address located hundreds of miles away or more) or send the mule out to pick the package up from an empty house or some other fraudster-friendly shipping destination.

Fraudsters are increasingly using mules to pick up fraudulent BOPUS orders as well. To provide some cover for these activities, the fraudster will likely tell the gig worker that they’re a legitimate reshipping business.

Gig workers can also help fraudsters avoid fraud detection algorithms that are designed to look at account characteristics and user behavior. Fraud often originates from brand-new customer accounts, so anti-fraud tools will scrutinize orders coming from those accounts extra carefully.

A gig worker, however, can open accounts, engage in some shopping activity, and generate a track record of “normal” behavior before turning the account over to the fraudster. When the fraudster then places an order with a stolen credit card, the anti-fraud tool will no longer see the age and characteristics of the account as red flags.

Similarly, gig workers may be hired to open accounts or place transactions because they have an IP address or geolocation that matches the victimized cardholder’s.

How Can Merchants Protect Themselves from Gig Economy Fraud?

A lot of the tasks fraudsters outsource to gig workers are specifically designed to help them beat fraud detection filters and other anti-fraud tools. This makes things tougher on merchants, but many fraud indicators may still be present. By analyzing your transaction data and updating your tools and filters as necessary, you may be able to limit the effectiveness of gig economy fraud methods.

Beware of relying too heavily on IP addresses, geolocation, and same-town shipping addresses as mitigating factors when subjecting suspicious orders to manual review, as these are the easiest indicators for gig workers to falsify.

Conclusion

Gone are the days when we can pretend that online fraudsters are just a few sad individuals holed up in basements. More often than not, online fraud runs itself like a business these days, right down to hiring large amounts of affordable labor as needed.

Unchecked fraud will result in unwinnable chargebacks that eat away at your revenue and imperil your merchant accounts. Gig economy fraud can be difficult to deal with, but it’s not unstoppable. If your fraud rate is going up, it’s critical that you get the analytics, tools, and support you need to deploy an effective prevention strategy as quickly as possible.

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