INTERNET FRAUD IS ON THE RISE

dynamics of change
and consumer behavior

Introduction
The year 2020 brought about numerous changes and proved challenging and even daunting in many respects. Throughout the year we were repeatedly made aware of fraudsters ramping up their activities, with old scams featuring even more frequently and new ones devised along the way. Fraud is accelerating on the back of the robust growth of ecommerce, increasing popularity of online services, and massive consumer traffic to online marketplaces. In order to verify this statement, we initiated a survey to assess the market that gives rise to fraudulent activities in their most common forms such as bogus bank calls, phishing sites, etc.

The data confirms that our concerns about escalating fraud are not unfounded. In the first 11 months of 2020, the number of Russian consumers who experienced phone scams targeting banking information for the first time grew 50% more compared to the number of those who had already encountered it before. The second and third places in terms of newly targeted audiences belong to phishing websites and online bulletin board scams, respectively. Other surveyed types of fraud also demonstrated a significant growth.

Despite certain gender- and age-related differences and the variety of ways in which regional and social groups are sought out by scammers, it emerges that anyone can become a victim of fraud. It is, therefore, crucial that society at large is made aware of the problem and consumers became more alert to old and new scams
  • 150 bln RUB
    is the potential damage caused by the investigated fraud as of 11 months of 2020
  • 1/3 of all
    "bank" calls happened in 2020
    (+50% per year)
  • 45% of fraudulent activities
    is money theft from bank cards through websites, mailings and SMS
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Relevance
Russia is among the leading nations in terms of ecommerce popularity. According to PwC [1], at least 69% of Russian consumers shop online on a monthly basis. The ecommerce market is projected to grow 34% versus 2019 and reach ₽2.5 trillion by the end of 2020 [2]. Across the globe, 2020 was marked by the boom in digital services and technologies that allow people to keep working, catch up, stay fit and, yes, shop during the lockdown.

However, the growing shift to online shopping and the rise in transactions using cards, which are now accessible on various devices, have not only made life easier, but also opened the door to a number of risks. Of these, the biggest by far is falling victim to a scam.

BrandMonitor specializes in fighting against counterfeits and brand protection, including from fraudulent activities. A survey of Russian consumers was organized to better understand the illicit market; it gauges the scale of fraud targeting credit/debit cards and purchases made through online stores and marketplaces, as well as phishing scams.

[1] PwC. Global Consumer Insights Survey 2019. — 2019.
https://www.pwc.ru/en/retail-consumer/publications…
[2]
http://www.finmarket.ru/news/5 343 198
Methodology
Date of the survey: December 4, 2020
The nationwide opinion poll VCIOM-Sputnik, conducted by the Russian Public Opinion Research Center
Sample size: 1,600 respondents from 80 Russian regions, covering all of the country's federal districts.

The survey was conducted using a method of stratified two-stage random sampling of landline and mobile phone numbers. The sample comes from the complete list of phone numbers in use in Russia.

The data was weighted by selection probability and by social and demographic parameters. The margin of error for the 95% confidence level does not exceed 2.5%. Along with the sampling error, data distortions may be caused by the wording of the questions and various circumstances emerging during field work.

Random (probability) sampling allows for estimation of the measurement error and generalization of the survey data to the whole of the population.

The respondents were asked whether they had been exposed to certain types of scams, lost money to them, and whether their losses were recovered. The questionnaire elicited the respondents' experience with a total of 11 different scams. We were interested in the following types of fraud:

  • scams targeting credit/debit cards (cash withdrawals from ATMs, calls purporting to be from a bank employee, or card-to-card payments that puzzled the respondent);

  • fraud experienced during online shopping (goods paid for via an online store or an online bulletin board but never delivered, or consumer directed to a phishing website to complete the payment);

  • scams that use mobile phone, email, or social media (text messages and calls urging the recipient to transfer funds, emails notifying of a lottery win, or hijacking of social network accounts)

  • scams involving bogus health services or checkups (calls with offers of a free physical exam followed by a proposal of a loan).

Results
Fraudulent activities are perpetrated on a large scale and in a systematic way. Only 17% of Russians can claim that they have not encountered any of the aforementioned scams. At the same time, 14% of respondents have lost money to scammers at least once, of whom only 9% managed to recover the losses. Total losses to the scams surveyed for just 11 months of 2020 amounted to ₽150 billion.

The survey shows that the most common scam involves direct targeting of card holders by crooks trying to steal funds by eliciting confidential data in the guise of bank employees or by making ATM withdrawals, rather than by luring consumers to fake websites or by sending them texts or emails. This type of fraud accounts for 45% of all illicit activities, costing consumers at least ₽66 billion in 2020. Direct theft from card accounts in Russia results in an average loss of ₽27,000: scammers call from unknown numbers, introduce themselves as bank employees and under various pretexts (often claiming that they are trying to prevent a potential fraudulent transfer or withdrawal of funds from the consumer’s account) trick consumers into giving them code words, verifications codes sent to their phones, or any other confidential information. The range of the amount stolen is impressive: crooks get away with sums from ₽20 to ₽250,000.
Scams targeting credit/debit cards, calls from fake bank employees
% of the number of respondents
17%
First encountered in 2020
34%
First encountered prior to 2020
Phishing websites
% of the number of respondents
7%
First encountered in 2020
10%
First encountered prior to 2020
Scams that use online bulletin boards (Avito, Youla)
% of the number of respondents
2%
First encountered in 2020
5%
First encountered prior to 2020
The biggest average loot was collected by conmen selling fake health services and checkups, with fraudsters calling consumers to offer them free medical consultations and then pushing them into taking out a loan on highly unfavorable terms. The average loss to the scam is over ₽50,000. According to our estimates, this scam robbed Russian consumers of more than ₽45 billion.
Designer:
Anna Ilyina