The holiday season is a critical time for businesses, characterized by increased sales and customer interactions. But alongside these opportunities, scams and cyberattacks grow as scammers take advantage of the holiday rush. The growth of e-commerce, along with a high transaction volume and seasonal urgency, creates a fertile ground for cybercriminals. Losses from global e-commerce fraud were estimated at $48 billion in 2023 according to Mastercard, highlighting the urgent need for businesses to strengthen their defenses.

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

According to Cyberintphishing alerts increased by 46% last December compared to the rest of the year. Akamai also reported a 150% increase in phishing victims from mid-October to the end of 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 undetected for long periods. The result is a significant financial loss that may take months to fully understand.

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

This growing problem isn't just affecting retailers. Service-based industries, including finance and healthcare, are increasingly targeted by synthetic identity fraud as fraudsters seek to exploit customer data and organizational weaknesses.

Real-life examples of holiday cyberattacks

Holiday fraud is not an abstract threat – it has real and devastating consequences. For example, on Christmas Eve 2023, The Ohio Lottery experienced a cyber attack which close the main internal applications. While the gaming system remained operational, disruption to services such as mobile checkout and high-value prize claims caused significant disruption 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 the deployment of ransomware within its systems. The ransomware disrupted critical functions, including payroll and print production, affecting operations for days.

These examples show that cybercriminals aren't just targeting retailers during the holidays — industries ranging from healthcare to education are also at risk.

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Other Holiday Scams Targeting Businesses

Scammers use a variety of tactics to take advantage of businesses during the holiday season. The most common scams include:

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

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

How businesses can protect themselves from holiday scams

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

1. Training and awareness of employees
   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 turning into costly mistakes.
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. Predictive AI modeling can be particularly useful in distinguishing fraudulent activities from legitimate transactions without causing unnecessary friction for customers.
3. Improved security protocols
   Implementing two-factor authentication (2FA) and secure payment gateways can help protect customer data. Tokenization and encryption further protect 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, continuous training ensures employees stay alertespecially during the holiday season when phishing attempts increase.
5. safety
   Insurance, especially cyber insurance, can provide essential financial protection in the event of a cyber attack or data breach. These policies often cover losses related to data theft, system outages and fraudulent activities. However, businesses should carefully review their insurance policies to understand what risks are covered, including fraud such as 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 come in handy. 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 checks
   Regular performance security auditsespecially before the holiday season, it can help businesses identify weaknesses in their systems. This proactive approach allows for timely adjustments and ensures that cyber security measures are up to date.

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CONCLUSION

The holiday season offers businesses tremendous 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 safer and more successful holiday season.

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