Beware: Holiday Season Fraud is Nearing

As December begins, eCommerce merchants, banks, and financial institutions face an annual challenge: the rapid rise of fraud and cyberattacks during the holiday season. With Christmas and New Year just around the corner, fraudsters are preparing to exploit the holiday rush, putting customer data and financial operations at risk.

According to Mastercard, global eCommerce fraud cost businesses $48 billion in 2023 — a stark reminder that vigilance during this season is non-negotiable. And while retail often takes the spotlight, financial institutions, healthcare, and even logistics are equally vulnerable. For banks especially, the stakes are high. Phishing alerts surged by 46% last December, as reported by Cyberint, and phishing victims increased by 150% from mid-October to late November, according to Akamai. The message is clear: this is a critical period to strengthen your defenses.

This article will explore the latest fraud trends, common tactics fraudsters use, and actionable quick strategies to safeguard operations during the holiday season.

The Rise of online authentication fraud

This alarming trend, fueled by phishing scams, credential stuffing, and brute force attacks, preys on weaknesses in login systems and user behavior. Fraudsters use these tactics to break into accounts and carry out fraudulent activities, leaving individuals and businesses vulnerable.

What makes this even more concerning is how advanced these attacks have become. Cybercriminals are using sophisticated tools and automation to scale their efforts—sending fake emails that look convincing, testing stolen credentials across multiple platforms, and guessing weak passwords through relentless brute-force attempts.

The stakes are high for banks and financial institutions. These attacks can lead to account takeovers, unauthorized transactions, and not just financial losses but also a significant hit to their reputation.

Tactics Fraudsters Use During the Holidays

Fraud schemes during the holiday season are diverse, and their impact extends beyond direct financial loss. Some of the most common tactics include:

• Phishing Emails: These emails disguise themselves as legitimate customer inquiries, shipment notifications, or payment requests, tricking people into sharing sensitive information or clicking harmful links.

• Fake Invoices: Fraudsters send fraudulent bills, banking on the holiday rush to bypass verification processes.

• Gift Card Scams: Scammers impersonate executives to pressure employees into purchasing gift cards, which they then steal.

• Overpayment Scams: Criminals make overpayments and request refunds before the original payment fails, leaving institutions liable for the loss.

These scams aren't just inconvenient — they disrupt operations, damage trust, and lead to significant financial losses.

Real-Life Examples of Holiday Cyberattacks

Holiday fraud is not just a theoretical risk; its consequences are real and far-reaching.

On Christmas Eve, 2023, the Ohio Lottery faced a cyberattack that disrupted internal applications. While the gaming system remained operational, services like mobile cashing and prize claims were severely affected during one of the busiest times of the year.

In December 2022, a phishing attack targeted the Guardian media company, enabling attackers to plant ransomware within its systems. The ransomware disrupted payroll, print production, and other critical functions for days, demonstrating the widespread impact of holiday cyberattacks. These incidents show that financial institutions, service providers, and even public organizations are not immune to holiday fraud.

How Financial Institutions Can Stay Ahead of Holiday Fraud

While fraudsters intensify their efforts during the holiday season, financial institutions can mitigate risks through a multi-layered defense strategy. Here are six key actions to prioritize:

• Increase Awareness: Education is the first line of defense. Regular training should help employees and/or customers recognize phishing attempts, fraudulent invoices, and other scams. Empowering them to report suspicious activity can prevent minor issues from escalating.

• Adopt AI-Driven Fraud Detection: AI technology plays a vital role in fraud prevention. Tools like Veri-id analyze transaction patterns and user behavior in real time, identifying anomalies such as synthetic identities or irregular transaction flows. This allows for precise detection without interrupting legitimate customer activities.

• Strengthen Authentication Method: Multi-factor authentication (MFA) is evolving beyond traditional methods. FIDO2 technology integrates on-device biometrics like fingerprints or facial recognition with public-key cryptography, offering robust protection against phishing and credential theft. By removing passwords entirely, this approach reduces attack surfaces and improves user security.

• Review Cyber Insurance Policies: Cyber insurance can mitigate financial losses from data breaches and fraud. Customizable options, such as captive insurance, help address gaps in coverage for emerging risks like synthetic identity fraud.

• Conduct Security Audits: Proactively assess vulnerabilities in your systems, especially before the holiday season. Continuously fix weaknesses as early as possible to ensure your defenses are current.

• Utilize Behavioral Analytics: Behavioral analytics, like HiTRUST's DiiA (Device and Identity Intelligence Analytics), monitor device and user activities, gathering over 100 data points per session. This data enables the detection of anomalies like unusual login locations or device inconsistencies, providing an additional layer of defense against fraud.

Why This Matters

The holiday season brings immense opportunities for businesses but also significant risks. This period is crucial for banks and financial institutions to reassess cybersecurity strategies, educate employees, and implement robust defenses.

Fraudsters continue to evolve their methods, mainly through AI-driven scams and synthetic identity fraud. Staying ahead of these threats requires a proactive approach that combines the latest technology and informed decision-making. By taking these steps, businesses can protect their operations, safeguard customer trust, and ensure a secure holiday season.

As the holiday rush intensifies, remember that today's preparation will save you from potential losses tomorrow. Let's make this holiday season fraud-free.

Take action now

Talk with HiTRUST to secure your financial operations and protect your customers.