Fraud Attack

Index

9TH EDITION
SEPTEMBER 2020

Executive summary

2020 has been marked by significant global commerce changes due
to the overwhelming impact of the outbreak of Coronavirus (COVID-19).

Online consumer volumes have fluctuated considerably, impacting how merchants approach their
business practices and effecting how and where fraud and abuse occur. Forter’s Ninth Edition
Fraud Attack Index captures the most extensive research ever conducted in this field, with over
$200 billion in e-commerce transactions and the ability to identify over 800M unique users across
a robust network. This report tracks and explains these changes amid an unprecedented time of
global commerce.

This report highlights four major trends seen over H1 2019 - H1 2020

MAJOR TRENDS

A boom of new online users creates risk for increased false declines and fraud chargebacks

New users represent new revenue potential for many merchants, but
there is also potential for loss because of false declines. Traditional fraud
prevention systems are not able to accurately identify the legitimacy of
these new users resulting in:

• Good customers being falsely declined
• Greater exposure to instances of fraud

a new user is

5-7x
more likely to be falsely
declined than a returning user

Online shopping replaces brick and mortar, masking the impacts of fraud

For merchants that experienced unprecedented volumes of consumer
transactions, fraud attacks appear to be on the decline. Sheer numbers
of fraud are not necessarily decreasing, but the percentage is. Still, fraud
continues to advance and prevention should be prioritized.

Food Delivery & Beverage
volumes increased 93%

Grocery volumes
increased 119%

Home furnishings & garden
volumes increased 172%

New channels are creating new opportunities for fraud and abuse

Many merchants have been pushed to optimize both their digital and
omnichannel offerings to better serve new and existing customers.
However, this has exposed businesses to new vulnerabilities of fraud and
abuse. Both legitimate customers and fraudsters have already started to
take advantage of these under-protected areas.

55% increase in buy online pickup

increase in buy online pickup
55%
in store (BOPIS) fraud attacks

Policy abuse set to spike - aggressive
promotions and omnichannel options are
creating greater abuse risk, including
returns, promotion and reseller abuse

Fraudsters are laying the groundwork for future attacks

4.1 billion records in

With focus diverted, and security precautions diminished amid remote
work conditions, a perfect storm for fraud is brewing. While attack rates
in account takeover decreased slightly over the past year, fraudsters are
using this time to harvest and age rich account data collected through
data breaches and social engineering scams to launch more impactful
account-based attacks in the coming months. Also, new customer
accounts opened by less experienced users are likely to use weaker
passwords, fewer security steps, and be more vulnerable to Account
Takeover attacks.

Retailers need to prepare for increasing

ATO attacks during the coming months and holiday season

Data breaches exposed
4.1 billion records in
the first six months of 2019

DATA HIGHLIGHTS

Top level fraud attack statistics

Hotels
139% ↑
INCREASE IN FRAUD ATTACKS
Buy online pickup in store (BOPIS)
55% ↑
INCREASE IN FRAUD ATTACKS

Money services & cryptocurrency
65% ↑
INCREASE IN FRAUD ATTACKS
Identity manipulation
123% ↑
INCREASE IN FRAUD ATTACKS

High fraud incident categories

Tequila Branded apparel
more likely to be more likely to be more likely to be
fraudulent than fraudulent than fraudulent than
7x 27x 1.5x
other groceries other apparel

Baby formula

other alcohol

How the global pandemic impacted fraud trends

The power and risk of the new online buyer

Businesses have seen an unprecedented level of net new customers, and legacy fraud systems struggle to identify
legitimate new users from fraudsters due to the lack of data.

Portion of New Accounts Compared with Benchmark

*Week 2 - 26 represents the time period beginning Jan 6 (Weeks 2-26 of 2020).

This results in:

• Falsely declining new users at a
rate 5-7x higher than returning
users

• Increased risk of fraud and
chargebacks

• Future increased exposure to
account takeover attacks as
new users are less savvy on
safeguarding their personal data

Exiting June, new users on merchant sites account
for approximately 30% of overall consumer volumes
versus 5% - 7% during pre-COVID-19 days.

Service chargebacks versus fraud chargebacks

In the early months of COVID-19, data reflected spikes
in service chargebacks across many industries. Service
chargebacks typically occur when customers request for
charge reversals on their credit cards due to shipping,
delivery, or dissatisfaction with the product or service.
These chargebacks result in extraneous fees for merchants
and cut into revenue. The rise in service chargebacks
reflects two different phenomena:

1. Sudden spikes in overall order volume – legitimate
   shoppers that normally would have done their shopping
   in-store are beginning to overburden digital systems.

2. New users tend to expect the highest standards of service
   creating a gap in expectations and resulting in increased
   service chargeback rates.

Contactless delivery has a greater chance of service chargebacks

Instances of “fraud manifested as service
chargebacks” occur as fraudsters leverage
the current contactless climate to their
detail. For example, in food deliveries,
users can attach a note to “leave delivery
outside,” or “leave by the door.” Contactless
delivery fraud results in poor customer
experience and legitimate customers being
less likely to return to shop. Last-mile delivery
costs hovered around £1.6 B (US $2 billion)
for failed parcel deliveries in the UK.

INDUSTRY BREAKDOWN

Explore industry impacts:

As consumers across the globe moved entirely online, the number of legitimate online transactions increased
dramatically. Therefore, as a percentage of overall transactions, the proportion of fraud attacks in these affected
industries appeared to have decreased. Sheer numbers of fraud are not necessarily decreasing, but the percentage is.

Growing consumer transaction volumes during the timeframe reflected in this report, have served to mask fraud and
abuse attacks in specific industries. Nevertheless, fraud and abuse remain persistent issues that merchants must
prioritize. In industries where transaction volumes decreased, merchants were hit even harder. They lack the new
consumer volumes to offset increased fraud costs, eating away at business revenue.

Apparel & accessories

Beauty

Digital goods

Money services & cryptocurrency

Electronics

Groceries

Home furnishings & garden

Jewelry

Marketplaces

Travel

Variety home
shoe
hair dryer
credit card
money
noodle bowl
apple
office chair
shopping cart
airplane

APPAREL & ACCESSORIES

What’s trending in fashion this season?

51%↑
TRANSACTION VOLUMES

While fraud attacks decreased slightly, fashion merchandise consistently remains a target
for fraudsters as these products are easy to resell. Fraudsters target items that don’t require
sizing specifications – handbags / purses, scarves, hair accessories, sunglasses, etc. These
items can often be high value but are easy to resell given their universal appeal.

$255

Average order value
per fraud attack

61%

Average declined
order value is 61%
greater than average
approved order value

1.5x

Branded apparel has
fraud attacks 1.5x the
normal rate

Staying fresh faced for conference calls in COVID

65%↑
TRANSACTION VOLUMES

The beauty industry has seen a consistent rise both in online activity and
fraud attacks over recent years. Fraudsters favor the high value products in
this industry that they are able to easily resell to make a profit. Many people
are working from home and upticks in video conference calls mean people
are still investing in makeup and skincare products to look their best, even
while social distancing.

DIGITAL GOODS

What’s good in digital goods?

24%↑
TRANSACTION VOLUMES

Fraudsters’ favorites? Gift cards.

Gift cards are gaining popularity, especially for merchants in home
furnishings and garden, electronics, and Quick Service Restaurants
(QSRs). Prepaid gift cards are typically anonymous, transferable, and are
used as a currency almost equivalent to cash, making them desirable targets for fraud.

Digital currency gift
cards have fraud
attacks 5x the
normal rate

3x

Downloads (apps and
music) have fraud
attacks 3x the
normal rate

2x

Console games
(Playstation followed
by Xbox and Nintendo)
have fraud attacks 2x
the normal rate

The most common type of gift card fraud is when
stolen credit card data is used to buy gift cards
online and then resold online.

25%-60%

Gift cards are usually sold for 25% - 60% of
their real value on the dark web. This is less
than what they are actually worth, but still
relatively high compared to most stolen goods
on the dark web.

ELECTRONICS

What’s next in electronics?

59%↑
TRANSACTION VOLUMES

20%↓
FRAUD ATTACKS

Fraudsters favor this industry as electronics tend to be high value items that are
easy to resell. Fraudsters sell the stolen goods for below-retail prices on third
party sites and marketplaces while enjoying a nice pay off.

41% ↑

Consumer purchase volumes for computers, tablets, and
laptop accessories increased by 41%. Consumer volumes
in this area will continue to increase, especially as prolonged
remote education and work from home orders persist.

MONEY SERVICES & CRYPTOCURRENCY

Cashing it in quickly

Money services and crypto remain a growing industry and an attractive target
for fraudsters. Legitimate consumers are drawn to cryptocurrency for its tech-savvy
nature and forward-looking applications. For fraudsters, the easy cash out process
makes this a highly desirable industry, leaving businesses with the resulting
chargebacks.

Many crypto exchanges are starting to offer “card-to-crypto” services

– the ability to purchase crypto currencies using credit cards.

Legitimate customers are looking for this service as it gives them more
control over how they spend their money. However, these services come
with increased risks of fraud. Fraudsters can buy crypto using stolen
credit cards and enjoy added anonymity, making this type of offering an
even more desirable target for fraud.

FOOD DELIVERY & BEVERAGE

A taste of what’s happening in food & beverage

93%↑
TRANSACTION VOLUMES

Merchants in this sector experienced higher than ever transaction volumes,
leading to issues with stock, fulfillment, and delivery time frames, resulting in
poor customer experience and increased service chargebacks.

Consistently favored for fraud attacks? Alcohol.

Tequila

One tequila, two tequila,
three tequila…Floor?

27x

the normal rate

Champagne

A bit of the bubbly.

17x

the normal rate

Cognac

This brandy goes
down smooth.

16x the normal rate

Wine(average label)

Perhaps an acquired taste?

2x <

less targeted than
other alcohol

What are fraudsters hungry for?

119%↑
TRANSACTION VOLUMES

Grocery businesses in particular have been experiencing new patterns of
consumer behaviors. Retailers should pay attention to grocery deliveries
that are being serviced by third party applications. Forter data indicates that
these types of platforms are at an increased risk for fraud and breached
credit card information.

What’s risky in the grocery industry?

Non-risky items

5x

Diet drinks (of all brands) are
5x less likely to be fraudulent.

Organic groceries are
4x less likely to be fraudulent.

Least risky among the vegetables, though not surprisingly,
is spinach. Kids typically hate it but parents still try to force
them to eat it. This leafy green purchase is 8x less likely
to be fraudulent.

Riskier items

7x

Baby formula is almost 7x more likely to be fraudulent. Reports
indicate criminal syndicates (particularly in Asia) and fraud rings
have been exploiting an overseas market of baby formula for a
number of years. The lucrative operation has criminals holding
large amounts of the baby food in order to resell the products for
marked up (in some cases by 100%)
prices in overseas markets.

In other grocery news…

The week following the US Administration’s suggestion that
disinfectants could be used to treat Coronavirus, there was a
36% spike in the purchase of bleach products (of all brands).
This surge quickly decreased and within a week it had already
declined below the previous rates.

HOME FURNISHINGS & GARDEN

The comforts of home amid COVID

172%↑
TRANSACTION VOLUMES

With more people at home, many are investing in DIY projects and kid-friendly
toys for outdoor play including gardening kits, sandboxes, swing sets, and
children’s playhouses. Purchases of outdoor exercise equipment and power tools
have also increased.

The shine hasn’t worn off

Despite slightly decreased rates of fraud attacks in this industry, online fraudsters
in general tend to favor this industry since just one successful attack (given the
high value per item) can yield an extremely lucrative payout.

MARKETPLACES

What’s new in the market?

Marketplaces are consistently an interesting industry to watch as new kinds of
buyer-seller collusion often emerge and fraudsters are testing out different methods
of attack.

What’s hot in the market?

Facemasks & sanitizer.

Facemasks and sanitizers (hand and other sanitizing products) have
consistently been among the most purchased items in this industry.
In the early months of COVID-19, N95 masks were very popular. More
recently, consumers have switched to cheaper masks, and now more
“fashionable” masks that have prints or are branded are also becoming
more common.

A quieter than usual travel season

48%↓
TRANSACTION VOLUMES

118%↑
FRAUD ATTACKS

During this period, large increases in fraud attacks within subcategories
of travel (flights, ground services, and hotel) highlight that while consumer
demands are low, proper fraud and abuse protection need to be in place.
In this industry, fraudsters took advantage early on of the “getting home”
hysteria. Travelers looking to buy tickets quickly during this period were
more susceptible to get defrauded by fake or stolen tickets.

97%↓

During the peak of the COVID-19 outbreak transaction volume for the entire travel
industry showed a nearly 97% decrease.

A mixed bag

29%↑
TRANSACTION VOLUMES

30%↑
FRAUD ATTACKS

Variety refers to the old style stores that capture the “one-stop-shop” concept
for all consumer needs. They rely on their physical presence rather than digital
channels for customer engagement. However, COVID-19 conditions required these
retailers to quickly shift their business approach to meet online requirements.
This transformation has occurred rapidly without proper precautions in place, leaving
them more vulnerable to fraud and abuse.

Methods of attack

A perfect storm for fraudsters

COVID-19 has forced many businesses to conduct their work remotely leading to network
vulnerabilities. Fraudsters are taking advantage of recent data breaches, harvesting rich account
data, and leveraging social engineering scams to exploit merchants and their customers.

As retailers adjust to better accommodate shoppers, both legitimate customers and fraudsters
have started to take advantage of under-protected omnichannel offerings including more flexible
return policies. As things go back to normal, merchants should expect to see increases in returns
fraud and abuse rates.

Account takeover (ATO): →

Loyalty

BOPIS

Collusion

Policy Abuse

Instrument Manipulation →

Returns

Coupon Abuse

Repeat Offenders

ACCOUNT TAKEOVER (ATO)

Let’s breach the subject of ATO

5%↓
DECREASE

While there has been a slight decrease,
accounts are being penetrated and
breached now, with fraudsters harvesting
data to use in the future, possibly during the
holiday season. New online users will also
contribute to this trend and are more likely to
reuse passwords and take fewer precautions
to safeguard their personal data.

Fraud and risk managers should stay alert
in the coming 4-6 months. ATO can lead to
damages in brand reputation, and customer
trust, resulting in lost revenue.

Older, wiser, but more vulnerable...

Elderly populations have become more
frequent targets for account takeover
fraud. Criminals will call a victim and
convince them to open an account and
then have them buy large ticket items
(often high value jewelry or electronics),
and put a shipping address that is not
their own.

$25.6B

Account-focused fraud losses are
expected to reach $25.6 billion
in 2020.

Don’t let fraudsters reap the rewards

67%↓
DECREASE

Loyalty fraud has seen a significant drop,
which can largely be attributed to the
temporary decline of the travel industry
amid the current climate. However,
similar to ATO, loyalty account details are
currently being stolen by fraudsters and
held for future use, so merchants should
prepare accordingly.

22% of consumers shop exclusively with
brands of whose loyalty programs they
are members.

Account Aging

As fraudsters accrue more account
data during this period, merchants
should remain vigilant. Fraudsters
are breaching accounts and stealing
personal data, using this time to “age”
the accounts they steal. They are
taking the time to build the account’s
reputation, making it more difficult
for rules-based systems or manual
review teams to detect a hacked
account from a legitimate one.

COLLUSION

Working together to commit fraud

14%↓
DECREASE

Collusion occurs most frequently in
marketplace environments or gig economy platforms
where fraudsters work together to boost each other’s sales.
Fraudsters will post positive
reviews to one another’s stores and encourage
other shoppers to buy items from them.
Businesses lacking identity-linking capabilities to determine the trustworthiness of their
users suffer from this type of activity.

ATO and Collusion Combo Attacks

Attackers will open and age several accounts
on one continent and after several weeks or
months, take over other accounts on other
continents. These can look like disparate acts
but are often fraudsters working together to
avoid detection.

Collusion in the Gig Economy

These platforms offer users temporary, flexible jobs or services. Forter has noted rising
instances of collusion between the buyer/
collector. Often the MO is that they will buy
an item or service with a stolen credit card
and ask a connected entity to pick it up.

BUY ONLINE PICKUP IN STORE (BOPIS)

BOPIS fraud

55%↑
INCREASE

Buy Online Pickup In Store (BOPIS) fraud is increasingly more common as fraudsters
know that retailers, in an effort to ensure seamless customer interactions, will be
less likely to cause any friction at the point of pickup. Fraudsters commonly use the
victim’s correct billing and personal details, ask for in-store pickup, and then appear
in-store while assuming the identity of said victim.

Delivery Abuse

Some retailers have started to offer free delivery if customers pick up part of
their orders in-store. However, customers are abusing this omnichannel option
to capitalize on the free delivery. Instead of coming to pick up some of their
order in-person, customers will simply apply the free delivery services to larger
/higher value items (i.e. an expensive home appliance) and never come to the
physical store to pick up the smaller and less valuable items (i.e. household
cleaning supplies).

RETURNS ABUSE

Reduce the abuse 43%↓ DECREASE

Merchants should be prepared for this form
of policy abuse – where consumers take
advantage of a merchant’s return program and
policies – to pick up in the coming months.
In order to remain competitive in this COVID-19
environment, merchants have been more
flexible with their returns policies.

This includes:

• Return policy extensions. • No more “final sale” items. • Return anywhere.

As businesses go back to “normal,” there is
likely to be a spike in returns fraud and abuse.
Merchants should ensure they are prepared.

Curbside Pickup

Many retailers and consumers have
embraced curbside pickup (also
known as “click-and-collect”) as a
safe alternative to in-store shopping.
Merchants should keep curbside pickup
as a top priority, especially as the holiday
season approaches. It is likely that more
shoppers will turn to online channels
rather than in-store experiences.

POLICY ABUSE

Keeping consumers happy

32%↓
DECREASE

As customer expectations remain high and digital channels have
become a more primary focus, merchants are shying away from
strongly enforcing any policies that may restrict consumer interactions
with their brand and potentially turn away good customers.
Customers expect brands they shop at to trust them and
not create barriers to their purchase process.

COUPON ABUSE

A rewarding way to shop

22%↓
DECREASE

Despite an overall decrease in coupon abuse, data did
indicate a rise through the early days of COVID-19.
This eventual decrease was a result of the
plummeting activity
in the travel industry where coupons are most often used.
However, as noted in the Forter Fraud Attack Eighth Edition,
there was a large uptick in coupon use across the food
delivery, beverage, and grocery industries. They
offered new customers new user promotions and
loyal shoppers with added rewards points. Merchants should look for coupon and
promo abuse to increase in coming months, especially during
the holiday season.

INSTRUMENT MANIPULATION

Rise of the robots

33%↑
INCREASE

Instrument manipulation or the takeover of the
entirety of the instrument itself, reflects the
growing sophistication and the ease by which
fraudsters are able to access more affordable
mobile devices and hardware. Through
burner phones, virtual machines, bots, and
remote desktop protocol (RDP), fraudsters
mask their activities, cloaking themselves
from detection by less sophisticated fraud
prevention systems. Rules-based systems and
manual reviews will not be able to accurately
distinguish between legitimate device use
and when a device has been taken over for
nefarious purposes.

Bot Attacks

Bot attacks are being dedicated to
exploiting specific sites. These attacks
are launched from outside the country
where the business and items are sold,
but they are built specifically to attack
certain brands and are responsible for
tens of thousands of very aggressive
attacks. Smart home products including
home security and alarm systems are
being specifically targeted.

REPEAT OFFENDERS

Fool me once...

66%↑
INCREASE

More fraudsters are retrying their luck against websites whose systems have
previously failed to identify their attacks. These websites often have legacy
fraud systems in place leaving them more susceptible
to exploitation and less capable
of accurately stopping fraud. This trend also reflects
the repeat targeting of newer
and more vulnerable areas of the customer journey, including loyalty programs
and returns policies or industries where there are influxes of consumer volumes.

ON THE HORIZON...

A taste of what’s to come this 2020 holiday season

The upcoming holiday season is likely to
highlight the commerce trends seen earlier
this year. Many merchants attempting to
recoup some of the physical / in-store
losses they have felt earlier this year as a
result of the COVID-19 environment will aim
to capitalize on holiday consumer volumes
and new shoppers.

How can merchants prepare their business
to catch fraud while recouping losses
caused by the global pandemic?

Differentiate

between legitimate
behavior and fraud at scale

Online transaction volumes are
likely to soar in the coming weeks,
and merchant systems will need
to be prepared to meet demands
at scale to capture all potential
revenue. Merchants need to be able
to differentiate between atypical
holiday shopping behavior, new
users, and fraud. Fraud prevention
systems must understand new user
behavior and the broader holiday
context to approve legitimate
transactions in real time, without
impacting the customer experience

Areas of focus: false declines, cart
abandonment.

Deliver

new omnichannel
experiences- securely

Shoppers who once relied on
in-store interactions for all of their
holiday shopping will turn to digital
channels or omnichannel options.
Merchants will need to ensure they
not only have seamless connectivity
between shopping channels to deliver
on consumer demands, they’ll also
need to amply protect themselves from
fraudsters and good customers, looking
to exploit these new offerings.

Areas of focus: returns, policy, and
delivery abuse; BORIS/BOPIS.

Protect

your brand from impending
account-based attacks

With fraudsters taking advantage of
diverted attention, credentials and
accounts are being harvested now,
and will likely be exploited during
the holiday season. Ensure your
fraud prevention system can assess
every touch point and interaction a
customer has with an online platform
to catch suspicious account-based
activity. If you’re only stopping fraud
at checkout, you’re already too late

Areas of focus: ATO, New account
signup fraud and abuse.

The way forward

COVID-19 has changed global commerce.
As this new era of digital commerce has
begun, fraudsters have taken note.

How and where fraud and abuse are committed have shifted
and require merchants to alter their approach in order to
better protect their business and brand. Merchants must
sure their businesses are prepared to meet the new
challenges of the current climate.

DATA IN ACTION

Approve more

With a more sophisticated fraud prevention system in place, merchants will be able to accurately identify
legitimate buyers from fraudsters when an influx of new customers hit their site. Using a fraud prevention platform
powered by a global network of merchants allows retailers to leverage a wide set of data across geographies,
touch points (in-person and online), industries, and clients to accurately identify legitimate consumer behavior
and fraudulent behavior. This dramatically reduces false declines of good customers and protects businesses
from emerging fraud and abuse trends.

Prevent fraud and abuse at scale

Businesses need a single, fully automated and adaptable fraud prevention platform capable of assessing trust at
every point of interaction in real time. Unprecedented consumer volumes and shifts in digital interactions require a
fraud prevention solution that will scale seamlessly as a merchant’s business grows and shifts.

Protect new channels and offerings

As companies add new channels and strategies to meet changing consumer needs, new opportunities for
fraud and abuse will emerge. To support these expanding channels, merchants must be able to assess trust at
every point of interaction in real time – from login, to coupon redemption, pick-up, and returns. Retailers should
expect a spike in policy fraud and abuse if not amply prepared.

Always stay a step ahead

While many forms of fraud appear to be on the decline, increased online transaction volumes are masking the
true impact of fraud, and merchants cannot rest on their laurels. Fraudsters are capitalizing on diverted attention
to harvest and age account data now to launch more impactful account-based attacks in the coming months.
Merchants must examine their current approach to fraud and abuse prevention now, to properly prepare for the
future.

The last year has seen extreme changes, and the effects are sure to linger into 2021 and beyond. Merchants
must examine their current approach to fraud and abuse prevention now.

ABOUT FRAUD ATTACK INDEX REPORT

The Ninth Edition of Forter’s Fraud Attack Index highlights changes within and across the
dynamic world of online commerce from H1 2019 - H1 2020. This report is based on the depth
and breadth of Forter’s robust database to examine shifting behaviors and trends in online
fraud attacks across global industries. With over $200 billion in e-commerce transactions and
the ability to know over 800M unique users across a robust network, the Ninth Edition Forter
Fraud Attack Index encapsulates the most extensive research ever conducted in this field.

This report reveals fraud attack rates, rather than successful fraud, exposing current fraud and
abuse patterns across a variety of global industries. This report aims to arm retailers with a
deeper understanding of the current commerce climate, payment trends and rising vectors of
account fraud and abuse, and to better equip them with the ability to ensure their businesses
and customers are better protected from the most common fraud and abuse methods and
vulnerabilities in the coming months and year.

Methodological approach

Our approach to data pulls involves two different
measurements in order to look for patterns in the
data and to best calculate fraud averages:

The first methodology described will allow for data
is more representative towards specific merchants
and therefore, maybe much more dependent on
specific phenomenon due to specific merchants.

The latter methodology tends to have more
fluctuations due to the fact that denominators
are lower.

$$ \frac{\sum^{M}i=1}{\sum^limits{M}i_{i=1}N_{i}}
$$

By weighting every transaction
identically, where larger merchants have
a larger impact on the resulting data.

Where F, is the number of fraud
transactions for merchant i and N, is the
number of transactions for merchant i and M is the
number of the merchants.

$$ \left\langle\frac{F_{i}}{N_{i}}\right\rangle
$$

By weighting every merchants’ rates
and averaging those rates, so that all
merchants will have equal impact on the
resulting data.

Where F, is the number of fraud
transactions for merchant i and N, is the
number of transactions for merchant i and M is the
number of the merchants.