We spoke with Christian Mangold , the co-CEO of Fraugster – a payment intelligence company serving the ecommerce and payments ecosystem, to get an insight into what is on the horizon
In 2021 the digital economy took a giant leap into the future with the arrival of web3 and the emergence of NFTs as a secure store of value for digital assets and collectibles. So, what can we expect to see in 2022? Will the year ahead usher in as many changes as the year that has just passed?
Prediction #1 – Fraudsters will exploit the openness of web3 using stolen financials
The metaverse, also referred to as web3, is a decentralised version of the internet where platforms and apps are built and owned by users. Meta (previously Facebook), Microsoft, and a host of large gaming companies are the first movers in this space and are building the future of our digital economy. So, while we should definitely expect exponential growth of digital assets in 2022, this doesn’t just mean high value NFTs, but also low value, high frequency in game purchases for things like swords, skins, and usernames, also known as downloadable content (DLCs).
The main risk this presents is that these environments are preferred locations for fraudsters testing stolen financial instruments (to see if they are approved) before going on to make higher value purchases. This presents a massive chargeback risk for merchants, and especially gaming companies. Alternative payment methods like cryptocurrencies are not risk free either, as they provide little to no purchase protection to customers. We therefore forecast an increase in fraudsters exploiting the openness of a nascent web3 using stolen financials that are easily available on the dark web, but will soon be even more easily exchangeable in the metaverse.
In parallel we expect to see an increase in the number and value of scams coming from fraudsters masquerading as creators. A reference example from 2021 was Squid Coin, a fraudulent cryptocurrency named after the wildly popular Netflix series, Squid Games that netted scammers an estimated USD 3.5 million dollars. Curators of web3 environments will need to introduce additional KYC checks and better ‘creator monitoring’ to combat this threat. We are already seeing online marketplaces tackling this issue with merchant monitoring solutions, which led us to believe web3 platforms will need to take similar steps. The challenge is that web3 is going to look a lot […]
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