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Promo abuse fastest-growing fraud threat for online marketplaces

Promotion abuse is the fastest-growing fraud threat facing online marketplaces, with 52% of companies noticing an increase in abuse activity over the past year, new data from fraud detection and payment acceptance specialist Ravelin shows today.

Often underestimated as a threat, promo abuse is a type of online fraud that involves customers taking advantage of a business’s offers, for example sign-up bonuses, referral discounts and voucher codes — often leading to eye-watering hidden costs for the business.

Promo abuse is particularly affecting ride-hailing apps and food delivery apps, with 57% seeing a noticeable increase in the past year. 42% of marketplaces that connect customers with third-party sellers for goods and services have also suffered a noticeable increase.

These findings are from Ravelin’s latest report entitled Online marketplaces: fraud trends 2021, which draws on research from more than 1,000 fraud professionals working in large online merchant businesses around the world.

Promo abuse fraud

“Promo abuse may seem like small fry for fraud teams in comparison with online payment fraud and friendly fraud, but it’s growing quickly, and it’s eating more and more into profits. It’s now at a stage where you can’t really ignore it any more,” comments Martin Sweeney, CEO, Ravelin.

“It can be difficult to monitor though. Voucher codes often need to reach a large audience to be effective, and so the sheer number of codes merchants release makes it difficult to spot fraudulent activity.

That’s why network analysis is so important. Network analysis looks at a number of factors like device ID, email address, phone number and more to determine whether a use of a promotional code is genuine or abuse.”

While promo abuse is the fastest-growing threat, online payment fraud remains the number one threat facing online marketplaces, with over three quarters of fraud professionals seeing it as their top risk.

Account takeover, where fraudsters obtain a customer’s account login details and use them for illegal activity, is another significant threat facing online marketplaces. 79% of taxi app firms, 74% of food delivery services and 69% of goods and services marketplaces all say that account takeover is one of their biggest fraud threats.


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