No, there’s not an 85- to 90-year-old man who buys cheap stuff online and ships it to Delaware from his Alaska address. But that’s what the most fraudulent consumer in the United States would look like if all the characteristics were stitched together, according to a new study.
Criminals attempting online fraud aren’t likely telling the truth about their age or where they live. On e-commerce sites where users input their age, say as part of their profile, users identifying in the 85-90 age range are 2.5 times more likely to commit fraud than the average user, according to “The United States of Fraud,” a study that examined a year’s worth of data from Sift Science customers from August 2014 through August this year. Alaska likely ranks as the state with the highest fraud rate based on billing address because it is first in the checkout form drop-down list, the study notes.
Sift Science is a fraud detection and prevention tool that distills more than 5,000 fraud signals and delivers a score to reflect the consumer’s likelihood of being a legitimate user or a criminal. The company looked at a sample of 1.3 million transactions with shipping or billing addresses in the U.S., then cross-referenced the transactions with third-party data from FullContact, which makes contact management software, to identify gender and age. Sift Science then computed the fraud rate as the number of fraud users as a fraction of all users.
Shipping addresses indicate where goods were delivered. Sometimes merchandise goes to reshippers, which often have addresses in states along the coast, such as Delaware or Florida, and the products go on to other addresses. In other cases, the shipping address is where the criminal is based, the study says.
With billing addresses, the data comes from information entered to validate a credit card. Often, that information has been stolen and purchased online by thieves, or it reflects the addresses criminals input to try their luck because they don’t have actual billing information, Sift Science says.
Men are slightly more likely to commit fraud than women, and orders under $20 have the highest fraud rate, which suggests criminals use low-value orders to test if stolen credit card information is valid, the study says.
Suspicious behavior includes:
- A user with multiple identities. Someone with 2-4 accounts linked to a single device is eight times more likely to be fraudulent. When 4-8 accounts are tied to the same device, the likelihood of being fraudulent jumps to 14 times, according to the study.
- Odd hours. The “fraudiest time of day,” regardless of time zone, is 3 a.m., Sift Science said. And those transactions are more likely to occur on weekdays.
- Short-timers. Fraudulent users tend to open accounts, commit the crimes and move on. Accounts less than three days old are three times more likely to be up to no good, but the study also found “sleeper” criminals who committed fraud after about 60 days.
“Often, it’s the unexpected or hidden clues—like knowing that users claiming to be 85 years old are much more likely to be fraudsters than those listing their age as 40—that provide the most value,” the report says.
When looking at online and offline crime, the study found that states with a high rate of robbery—Nevada, Delaware and Florida—also had a higher rate of e-commerce fraud.
The Midwest had the lowest rate of fraud whether by shipping or billing address, while the South made a disproportionate showing in the Top 10 states with the highest fraud rate, based on shipping address. States with the highest online fraud rate by shipping address are:
- Delaware
- Florida
- Nevada
- Georgia
- New Hampshire
- Oregon
- New York
- Kentucky
- Alabama
- Mississippi
States with the highest online fraud rate by billing address are:
- Alaska
- Delaware
- Arizona
- Washington
- Alabama
- California
- Nevada
- Ohio
- Florida
- Mississippi