When people think of online fraud, they usually think of ID theft and sophisticated schemes which hack into computers to siphon off money or steal goods. But many ecommerce businesses find themselves grappling increasingly with first party fraud – a situation in which a person misrepresents the facts of their own interaction with a business for financial gain. Indeed, this type of scam has seen a staggering 250% increase since 2007, according to CIFAS, the UK’s fraud prevention service.

While high street retailers have grown savvy and made huge inroads in blocking plastic fraud in their online operations, there is still a large pocket of fraudulent activity which goes undetected and therefore unaddressed: false Goods Lost in Transit (GLIT) claims. This type of first party fraud can be the work of both hardened professionals and unethical amateurs who have learned to play gaps in the system.

With the rapid development of broadband and wireless internet feeding phenomenal growth in home shopping, the way many brands interact with consumers is changing fundamentally. The internet has opened the retail world to real-time remote browsing and buying without consumers ever needing to set foot into a high street shop, yet it has also become an arena of commercial interaction which proffers plentiful opportunities for fraudsters, intent on finding flaws in the system, to swindle retailers out of goods.

Indeed, with the value of products and services purchased over the internet in the UK estimated at £49.8 billion for circa 1.1 billion parcels and 1 billion home deliveries, opportunities for this type of fraud abound.

Though most businesses do not tolerate unnecessary expenses, GLIT is perennially shrugged off by retailers as a ‘cost of doing business’; the mistaken impression that when vast numbers of parcels are ordered and issued remotely, some are bound to get lost. Yet, the home shopping sector needs to understand the damaging effect false claims are having on profits – and potentially on reputation, too.

Indeed, the Interactive Media in Retail Group (IMRG) conservatively estimate the actual cost of GLIT at £48.5 million each year. Early evidence gathered from new research being conducted by Transactis, however, suggests the figure could in reality be as much as five times that number – in other words, as much as £250 million a year.

The worrying fact is that GLIT fraud remains largely under the radar and something of a non-priority, despite online fraud in the UK being more than double that of the US and Canada according to a new study by CyberSource, a Visa company. Moreover, the study suggests only 30% of online retailers in the UK see improving automated fraud detection as a key concern, compared to 53% of those from North America.

One might conjecture that cyber fraud is treated with such triviality because of the potential damage retailers could do in challenging genuine customers with legitimate GLIT claims. The last thing firms want to do in this competitive retail climate is alienate honest customers. Alarmingly, however, in taking this stance, retailers themselves may unwittingly compound the problem – particularly when they take an obvious no-questions-asked approach to most or even all GLIT claims.

In some cases, mistaken but honestly intended GLIT claims processed with little or no investigation can alert ordinary customers with shaky ethics to the opportunity of getting away with false claims. So not only are home shopping retailers facing the difficult task of detecting hardened criminals, whose scams might be very complex, but they are also increasingly in the sights of amateur opportunists who will take advantage of a loophole when they find it.

Certainly, as a growing number of consumers include the web in their range of shopping channels, online retailers are becoming increasingly exposed to such fraud.

False GLIT claims, therefore, can no longer be left ignored and largely unchallenged. To prevent first party fraud from growing to epidemic proportions, online retailers need to implement a system which screens claims for fraudulent activity, determining potential risk at the first point of contact.

Having a clear view of a customer’s transactional and fulfilment history – from as many of the catalogue and online retailers they deal with as possible – and data confirming whether the parcel was received and signed for or not, would help contact agents deter fraudsters and improve the customer service response for genuine GLIT claimants.

Moreover, assembling and centralising critical data would allow retailers to flag GLIT hotspots and suspicious customer profiles, ensuring additional questions are asked as soon as a claim is made from a suspect address or individual. Often it only takes a little probing for a fraudster to drop a claim without any need for a refund or redelivery, let alone investigation. Moreover, it helps safeguard genuine claims and ensure they are resolved promptly, without intrusive or inappropriate questioning.

GLIT is fast becoming the new shoplifting: a growing web curse attracting both professional and amateur scam artists. If not taken seriously by retailers – and all the people involved in their logistics, from the IT departments to the delivery suppliers – it risks becoming endemic. Improving the management of genuine claims, whilst cracking down on fraudulent ones, must thus become a priority for all home retail companies, especially as remote shopping becomes increasingly established as a top channel choice for UK consumers.