The holiday season is a critical time for businesses, marked by increased sales and customer interactions. But alongside these opportunities, fraud and cyberattacks surge as fraudsters exploit the holiday rush. The rise in ecommerce, coupled with a high volume of transactions and seasonal urgency, creates a fertile ground for cybercriminals. Losses from global ecommerce fraud were estimated at $48 billion in 2023 according to Mastercard, highlighting the urgent need for businesses to bolster their defenses.

While retailers are a primary target, the risk extends beyond the retail sector. Industries such as hospitality, logistics and even healthcare face heightened vulnerabilities during the holidays. The increased demand for services and tighter deadlines leave all types of businesses exposed to potential scams, operational disruptions and data breaches. Small businesses, especially those dependent on the holiday season for a significant portion of their revenue, are particularly at risk.

According to Cyberint, phishing alerts surged by 46% last December compared to the rest of the year. Akamai also reported a 150% increase in phishing victims from mid-October to late November, showing the extent of holiday fraud.

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Synthetic identity fraud: A growing threat

One of the most concerning forms of fraud during the holiday season is synthetic identity fraud, which grew by 26% in the first half of 2024, according to ACI Worldwide. This fraud occurs when criminals combine real and fabricated information to create new, synthetic identities. These identities are then used to open accounts or make fraudulent purchases, often going undetected for long periods. The result is significant financial damage that can take months to fully understand.

The rise of AI has made synthetic identity fraud even more dangerous. AI-driven bots can quickly and efficiently create synthetic identities on a massive scale, while deep fake technologies — fake images, videos or voices — allow fraudsters to bypass traditional identity verification methods.

This growing problem is not just affecting retailers. Service-based industries, including finance and healthcare, are increasingly targeted by synthetic identity fraud as fraudsters seek to exploit both customer data and organizational vulnerabilities.

Real-life examples of holiday cyber attacks

Holiday fraud is not an abstract threat — it has real and devastating consequences. For example, on Christmas Eve 2023, the Ohio Lottery experienced a cyberattack that shut down key internal applications. While the gaming system remained operational, the disruption of services like mobile cashing and high-value prize claims caused significant setbacks during one of the busiest times of the year.

In another incident in December 2022, the Guardian media company was hit by a phishing attack that enabled ransomware to be planted within its systems. The ransomware disrupted critical functions, including payroll and print production, affecting operations for days.

These examples demonstrate that cybercriminals don’t just target retailers during the holidays — industries ranging from healthcare to education are also at risk.

Related: ‘Quishing’ Scams Are on the Rise and Can Drain Your Bank Account in Seconds

Other holiday scams targeting businesses

Fraudsters use various tactics to exploit businesses during the holiday season. The most common scams include:

• Phishing emails: These emails often appear as customer inquiries, shipment notifications or donation requests, tricking employees into clicking on malicious links or sharing sensitive information.
• Fake invoice scams: Criminals send fraudulent invoices for goods or services, hoping that businesses, caught up in the holiday rush, will pay without verifying the authenticity.
• Gift card scams: Fraudsters impersonate company executives or business partners and ask employees to purchase gift cards, providing the fraudsters with the card details.
• Overpayment scams: Fraudsters make an overpayment for products or services, then request a refund before the original payment is reversed, leaving the business out of pocket.

These scams can result in significant financial losses and operational disruptions, affecting not just retailers but businesses across all sectors.

How businesses can defend against holiday fraud

To protect against the heightened risks of holiday fraud, businesses must adopt a multi-layered defense strategy. Here are some critical steps:

1. Employee training and awareness
   Education is the first line of defense. Regular training sessions should teach employees how to recognize phishing emails, suspicious payment requests and other common scams. Empowering employees to report anything unusual can prevent small mistakes from becoming costly errors.
2. AI and fraud detection technology
   Leveraging AI-driven fraud detection tools can help businesses analyze transactions in real time, identifying unusual patterns that may indicate fraud. AI predictive modeling can be especially helpful in distinguishing fraudulent activities from legitimate transactions without causing unnecessary friction for customers.
3. Enhanced security protocols
   Implementing two-factor authentication (2FA) and secure payment gateways can help protect customer data. Tokenization and encryption further safeguard sensitive information, making it harder for fraudsters to steal valuable data.
4. Phishing protection
   Strengthening email security with filters, multi-factor authentication and anti-phishing software can significantly reduce the risk of phishing attacks. In addition, ongoing training ensures employees remain vigilant, especially during the holiday season when phishing attempts spike.
5. Insurance
   Insurance, particularly cyber insurance, can provide crucial financial protection in the event of a cyberattack or data breach. These policies often cover losses related to data theft, system disruptions and fraudulent activities. However, businesses should carefully review their insurance policies to understand which risks are covered, including scams like phishing or synthetic identity fraud. Many standard policies have exclusions for certain types of fraud, meaning businesses may not be fully protected.
   This is where captive insurance can be beneficial. Captive insurance allows companies to customize their policies to cover risks that may not be included in standard insurance. By filling in the gaps in traditional insurance policies, businesses gain more comprehensive protection and peace of mind.
6. Regular security audits
   Performing regular security audits, particularly before the holiday season, can help businesses identify weaknesses in their systems. This proactive approach allows for timely fixes and ensures that cybersecurity measures are up to date.

Related: What Businesses Can Do About a Trillion-Dollar Fraud Problem

Conclusion

The holiday season offers businesses immense opportunities but also exposes them to significant risks. The right combination of vigilance, technology and insurance will help businesses protect themselves from financial losses and operational disruptions, ensuring a more secure and successful holiday season.

Fraudsters continue to evolve their methods, particularly through AI-driven scams. Staying ahead of these threats requires not only awareness but also the right tools and strategies to safeguard against a wide range of holiday-specific risks.