Why Fake Reviews Present Real Risks For Payment Providers
Rochelle Blease is the president of G2 Risk Solutions, a global risk management firm.
Trust is a critical currency in the digital economy, but the problem of fake reviews is rapidly undermining it. This is because the problem, once isolated to shady sellers, has become a sophisticated, AI-powered enterprise.
The cost of losing trust is hard to quantify, but for payment providers, the risks posed by fake review merchants are material. The problem of fake reviews has evolved into enterprise schemes that carry financial consequences to any provider that inadvertently supports a deceptive merchant that's made a business of selling fake reviews. To illustrate the scope of the problem, Amazon removed 250 million fake reviews from its site in one year alone.
As enforcement ramps up by regulators and card networks, payment providers must strengthen their efforts to identify and shut out merchants who traffic in fake trust.
Not long ago, fake reviews were relatively unsophisticated—often easy to recognize and clearly fabricated. Now, an entire industry has emerged that uses automation and AI to scale operations and mimic natural human language and sentiment. This new breed of fake reviews is harder to spot with the naked eye.
Fake review merchants have also wised up to new methods to evade detection tools, especially for payment providers who are still using more basic methods. They use techniques like transaction laundering to disguise the sale of fake reviews by processing transactions through a shell site or company. They operate across various regions of the world, making it harder to isolate the problem.
For unscrupulous sellers looking for a quick way to boost their "credibility," fake review services are cheap, plentiful and tempting. This is driving the demand for an illicit service that fake review merchants are happy to meet—and it's increasingly coming at payment providers' expense.
In 2024, the FTC announced a final rule, "Trade Regulation Rule on the Use of Consumer Reviews and Testimonials," that, among other things, prohibits selling or purchasing fake consumer reviews, testimonials or indicators (e.g., likes, shares, follows). It also allows the agency to seek civil penalties against violators.
While the regulation is aimed at merchants, intermediaries like payment providers are certainly not out of the crosshairs. Card networks are increasingly scrutinizing providers that enable bad actors, whether knowingly or through a lack of proper oversight. Payment providers can face significant card brand penalties if they are found to facilitate deceptive behavior.
The FTC rule is a signal: The fake review economy is no longer a "buyer beware" issue for consumers. It's now a compliance and financial issue for payment providers who find themselves ever more in the spotlight.
As fake review operations and compliance risks grow more troubling, payment providers must take proactive steps to enhance their merchant vetting and monitoring to align with regulatory expectations. Their risk management strategies can be enhanced through the following steps:
1. Update onboarding procedures. Traditional underwriting processes are often no longer enough to identify sophisticated fake review sellers. When onboarding new merchants, payment providers must institute rigorous vetting using a broad array of data points. This helps payment providers make informed decisions about who to accept in their portfolios, and it helps prevent bad merchants from obtaining payment accounts that facilitate the widespread sale of fake reviews.
2. Leverage AI and analytics. AI, combined with deep troves of merchant data, can uncover hidden suspicious patterns and red flags that aren't readily obvious. AI can synthesize billions of data points almost instantly, providing much deeper insight into a merchant's predicted risk behaviors.
3. Implement ongoing monitoring. Even merchants who cleanly pass onboarding checks can begin selling fake reviews at any time. In fact, it's common for bad merchants to use benign-looking "front sites" to obtain merchant accounts. That's why it's essential to have continuous merchant monitoring in place—actively scanning for key red flags around the clock.
4. Share information. Payment providers can work closely with marketplaces, card brands and regulators to share information and insights that benefit cross-industry fraud detection initiatives.
The online commerce ecosystem depends on trust between consumers, sellers and the systems that connect them. Payment providers have an important role to play by ensuring the merchants they support are contributing to a healthy ecosystem.
As fake reviews become more sophisticated and enforcement becomes more aggressive, the problem is more than a reputation concern. It's a compliance and risk issue that comes with costly penalties.
Those who fortify their defenses now will not only be better positioned to navigate the regulatory landscape, but they will build long-term value for online consumers and themselves.
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