How The Underworld’s Marketplaces Work

Conducting business online — especially when it involves bringing together various parties on a single platform — comes with its own unique set of challenges.

Chief among them, for both merchants and matchmakers alike, is the ongoing fight against fraudsters that are not only more sophisticated but, in many cases, always two steps ahead.

This week’s episode of the The Matchmaker Is In series zeroes in on the dark and hidden marketplaces that are not only bringing fraudsters together but helping them to flourish. Hosts Karen Webster and David Evans, economist and author of “Matchmakers: The New Economics of Multisided Platforms,” received an inside look at what’s really happening in the cyber underworld from a company doing its best to help matchmakers keep fraudsters at bay.

When Matchmaking Goes Dark

“All the criminal organizations — especially online — move way faster and are way more efficient than the real economy,” Michael Reitblat, CEO and cofounder of Forter, explained.

In the cyberfraud area, Reitblat noted, hackers and fraudsters work together across a multitude of platforms that actually make it easier for them to conduct their business.

Typically, this begins with hackers gaining access to stolen credentials through the types of massive data breaches that have made headlines in recent years. Whether its payment data or personally identifiable information (PII), the compromised credentials are quickly turned around and sold to fraudsters.

Reitblat said it’s not uncommon to see stolen data sold on websites that look similar to any legitimate eCommerce site a consumer would go to. Though the sites and data will vary based on the type of fraud a cybercriminal is looking to commit, these sophisticated sites can even include advanced searches that narrow down available data by card type, zip code, address or even the victim’s last name.

Cybercriminals can also use these dark matchmaking sites to access missing pieces of a stolen identity or credential, such as purchasing access to databases where they may be able to search for the Social Security number that matches the name of a compromised payment card.

According to Reitblat, there are various marketplaces out there for cybercriminals to gain access to everything they need to perpetrate their crimes — it goes way beyond just connecting with those who are selling stolen credentials.

Fraudsters can use their access to these illicit platforms to buy and sell stolen goods, track down physical locations where stolen products can be delivered and even buy access to databases full of stolen PII data.

“Digital crime is conducted in a very decentralized way because if you have one connector or one hub, then first, you’re dependent on it, and second, you have a risk of it being used as an asset by law enforcement agencies,” Reitblat explained.

Needless to say, cybercriminals are running a very sophisticated and well-developed ecosystem.

Bitcoin’s Power Play

“A very important piece in that ecosystem that’s enabled it to flourish in the last couple of years is bitcoin,” Reitblat said, adding that, prior to the increased usage of cryptocurrencies, it was tougher to conduct business in the criminal world online because there is no cash and no one would ever use a credit card.

“Bitcoin just did wonders,” he pointed out.

Now, fraudsters can buy and sell goods with bitcoin, and no one ever knows.

Not only has bitcoin helped to drive significant growth in the cybercriminal ecosystem, but it has also made it more efficient — in matchmaker terms, bitcoin has been a catalyst for ignition.

Previously, cybercriminals were dependent upon using intermediaries to handle the money aspect of their activities, which Reitblat explained oftentimes requires using physical access points, like drop boxes, and other means.

But with digital (and essentially untraceable) currencies at play, fraudsters can have access to all the infrastructures needed for their malicious attacks and get paid without even having to leave the house.

It’s enabled cybercriminals to work faster, while also opening the door to more people being able to follow the fraudster career path, Reitblat said.

Though he admits bitcoin has many good and legitimate use cases, it’s hard to ignore that the payment method “connects the criminal world and the legitimate world and enables for easier monetization for fraudsters.”

Fighting For Matchmakers

For Forter, keeping fraudsters at bay for both matchmakers and merchants means creating a truly fraud-free eCommerce environment.

Though Forter itself is not what you would typically define as a matchmaker, the platform aims to make it easier for matchmakers to do business by working to take fraud out of the equation.

With a decentralized cybercrime ecosystem and the rising sophistication levels of fraudsters, it’s not a job without its challenges.

But Forter’s approach involves making fraud decisions and taking on fraud risk on behalf of the merchant by reviewing all of a merchant’s online transactions and delivering frictionless, real-time “yes” or “no” answers for every one of them, Reitblat explained.

The goal is to remove the barriers that can keep those payments from happening.

“By removing the fear of fraud, which causes way more damage than the actual fraud to merchants, we enable them to accept way more transactions,” he added.

Forter takes a unique approach — using an extensive amount of data from both the merchants themselves and even the Dark Web as well — “to look at every transaction as if it is legitimate and try to prove that is a fraudster,” Reitblat said.

This requires looking at things a different way, as opposed to a merchant or matchmaker declining everything that looks suspicious.

“We are creating fraud-free eCommerce. We don’t want anyone that is not us thinking about fraud in the online world.”

Highlighting The Good

In Reitblat’s opinion, one of the most admirable matchmakers out in the market is Amazon. Though we tend to think of it as just an online retailer, he noted that its biggest business is as a marketplace, enabling other merchants to use their platform and technology to offer products.

Matchmakers like Uber and Amazon are clear examples of the power (and relevance) that comes with scale.

But for the growing number of matchmakers currently pursuing the “on-demand” economy, Reitblat said there are too many companies trying to solve the same problems, which leaves most of them facing the same difficulties because none of them are big enough.

“It can only work if it’s scaled,” he explained.

“If you need a different app for every location or a different app for every type of on-demand activity you want to do, then, in my view, it won’t work as well. A lot of those companies should stop competing against one another and start cooperating with one another to provide a unified consumer experience.”