Subscription Fraud

Customers can open disputes or choose another platform, especially if their accounts have been stolen. So, compromised personal information, identity theft, and account takeovers are issues on subscription platforms, which can lead to loss of trust and stop subscribers from continuing to use the platform. 

Since such platforms use recurring payments, customers can forget about subscriptions or fail to cancel on time. This leads to angry users who then engage in friendly fraud or chargebacks, disputing the charges and opening a claim for a refund. If a customer’s claim gets approved, they can recover funds, sometimes from all previous subscription payments.

There’s a set of different techniques that fraudsters use to successfully target their victims on subscription platforms. 

Some popular examples of subscription fraud include:

• Free trial abuse (using multi-accounting and different profile credentials to exploit platform benefits, such as free promos for new users). 
• Account takeovers (hijacking into existing accounts, especially high-value ones with ongoing subscriptions that don’t have any red flags in terms of fraud). 
• Synthetic identity fraud (blending a mix of real and fake identity data to create a new persona that’s harder to detect).
• Resale of unauthorized access (selling stolen user credentials to third parties at a lower price to make a profit).

Even though most platforms use fraud prevention measures, sometimes, automated alerts aren’t triggered during more subtle fraudulent actions. For example, tracing a stolen credit card is easier than detecting a synthetic identity on a subscription-based platform. 

The same goes for a case of multi-accounting because it’s not easy to determine the customer’s true intentions. A user signing up for multiple free trials with different email addresses could be a genuine customer testing the service or a fraudster attempting to exploit it without paying.

One of the best ways to prevent users from abusing free trials or taking over accounts is to implement proper identity verification protocols. For example, subscription platforms that onboard their users and check their personal information before allowing them to create a new account on the platform minimize fraud rates. 

This can be done through a simple flow of asking the user to upload their government-issued ID document (document verification) and complete a liveness check using their smartphone device (selfie verification). Other AI-powered anti-fraud tools like phone verification and proxy detection are highly effective. Phone verification identifies fraudulent numbers linked to accounts, while proxy detection uncovers users concealing their identities behind proxies to commit fraud.