The jewelry business is a 'favorite for fraudsters.'
E-commerce fraud as a percentage of sales dollars is declining across the board, with some notable exceptions — one of them being the jewelry business.
Total fraud decreased 34.7 percent from first-quarter 2016 to first-quarter 2017, according to the PYMNTS’ Q1 2017 Global Fraud Index. PYMNTS.com and Signifyd partnered on the index, which monitors fraud attempts across more than 5,000 global e-commerce merchant websites across eight industries.
The companies said in a press release that one of the main reasons behind the overall decrease is the use of machine learning in fraud prevention solutions, which are increasingly able to distinguish real orders from fraudulent ones.
Unfortunately, businesses in the "jewelry and precious metals" and "department stores" categories are seeing fraud increases.
"In those industries, fraudsters are targeting more transactions at higher values and more transactions overall, indicating that fraud is actually growing faster than eCommerce sales," according to the report.
In the jewelry and precious metals industry, e-commerce fraud grew by 12.8 percent from first-quarter 2016 to first-quarter 2017. Specifically, fraud amounted to 11.76 percent of e-commerce sales in first-quarter 2016 and 13.27 percent in the first quarter of this year.
In fact, the industry is a "favorite for fraudsters," according to the report.
One reason for that is the industry's "over-reliance on blacklisting."
"Maintaining lists of fraudsters and blocking them using identifiers such as name, credit card details, email and IP address is a common practice in this industry," the report notes.
A key problem with blacklisting: "Like any static rule, fraudsters can combine different factors in their orders and make multiple attempts until they figure out a winning combination. After that, the fraudster simply repeats the process until the merchant wises up and blocks them. Then the entire cycle begins again."
Another issue within the industry is "data secrecy."
According to the report: "Historically there’s been intense competition for high value customers. As a result, many Jewelry and Precious Metals merchants remain unwilling to share enough data about their customers and transactions to allow them to use advanced fraud detection and protection."
There's also the fact that jewelry and precious metals "are still seen as viable alternatives to currencies and financial investments in turbulent markets, which means demand remains high."
"Fraudsters are easily able to resell stolen goods and are assured of a global marketplace for such goods," the report notes.
Jewelry and precious metals merchants saw an average chargeback of $1,970, the highest among the eight analyzed merchant categories.
High-value orders have the highest fraud rates – online orders worth more than $500 have a fraud rate almost 20 times as high as that of lower-value transactions.
The Wilkerson Way
See how one jeweler's inventory sale turned unsold merchandise into cold, hard cash.