Fraud in a digital world: tips and best practice for digital merchants

The digital goods market has seen exponential growth over the past few years and double digit growth is projected for the foreseeable future in almost every segment. Fraudsters have increased attacks to exploit the vulnerabilities inherent in selling digital products.

Electrons versus atoms

Virtually any product that can be sold in stores can now be sold online. Similarly, a huge number of products that can be sold as physical goods (books, magazines, games, movies, etc.) can now also be sold as digital products— either as services or downloads.

The benefits of selling digital goods has fueled strong growth in this market segment:

  • Instantaneous fulfillment leading to increased likelihood of impulse purchases is a key benefit.
  • Cost Savings. Digital products often enjoy lower operational, production, and fulfillment costs compared to physical goods, resulting in lower prices for buyers (e.g., Kindle books cost less to produce and deliver than hardcover or paperback versions).
  • Apps offering digital goods often make purchase and fulfillment almost effortless (e.g., adding a song to your iPhone from iTunes requires just one click).
  • Global Market. Digital products are not impacted by the shipping, logistics, time-zone, or import/export challenges associated with physical goods.
  • Automated/Continuous Delivery. Digital goods can be fulfilled 24/7 via automated systems for “always open” availability.

Factors Impacting Fraud In Digital Products

Digital goods present different fraud mitigation challenges. The unique aspects of selling and fulfilling digital goods create inherently greater fraud risks:

  • Expectation of Immediate Fulfillment
  • Less Data Available for Fraud Screening
  • Higher Incidence of Mobile Transactions
  • Balancing User Experience with Risk

A new ebook from Kount, ‘Fraud in a Digital World‘ explores each of these fraud risks in detail, and provides the 12 best practices to fight digital products fraud.

Read the ebook here to discover how you can better protect yourself against digital fraud.

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