How can you understand and prevent Account Takeover (ATO) fraud?

Account Takeover (ATO) fraud happens when cybercriminals gain access to legitimate user accounts using stolen credentials, often through methods like credential stuffing. From making unauthorized purchases to stealing sensitive data, attackers can wreak havoc without the user ever knowing. 

With weak security practices and password reuse, attackers find it easier to break into accounts than ever before. Now, it’s essential to understand how ATO fraud occurs and what steps you can take to protect your business from this growing threat.

What is Account Takeover fraud?

Account Takeover (ATO) fraud occurs when an attacker gains unauthorized access to a legitimate user's account by stealing their login credentials. Once inside, they can carry out fraudulent transactions, change account settings, or lock the rightful user out. This type of fraud relies heavily on attackers using stolen data, often obtained through previous data breaches or phishing attacks.

Unlike other types of cybercrime, ATO doesn’t require a lot of technical expertise. It's more about exploiting weak security practices, like reused passwords, to gain entry into multiple accounts. Once the attacker is in, they can cause significant damage, including financial loss or data theft, all while remaining undetected for long periods.

In fact, approximately 26% of companies are targeted by weekly ATO attempts, emphasizing the frequency and persistence of these attacks.

How does it work?

Account Takeover fraud is all about gaining access to a user's account using stolen credentials. But how exactly do attackers manage to break into these accounts? Let's take a look at the common techniques they use to bypass security measures and take control.

1. Credential stuffing

Credential stuffing is a technique where attackers use large sets of stolen usernames and passwords from previous data breaches to try and access multiple accounts across different platforms. Since many people reuse the same password across multiple sites, attackers can quickly gain access to several accounts using the same credentials. It's like trying a single key in every lock until it fits.

Integrating secure SMS API solutions for example can help businesses validate users and block unauthorized access before it happens.

2. Phishing

Phishing is a more deceptive tactic. Attackers impersonate trusted organizations, such as banks or social media platforms, and send fraudulent emails or messages designed to trick users into revealing their login details. 

These messages often contain a link to a fake login page that looks legitimate but is designed to capture your credentials. It’s like receiving an official-looking letter asking you to "verify" your personal information, only to realize too late that it was a trap.

3. Malware

Malware, such as keyloggers or spyware, is used to infect a user’s device and secretly capture their keystrokes, login credentials, or other sensitive information. This allows attackers to steal login data in real time, often without the user’s knowledge. 

It's similar to someone secretly watching your every move on your computer and recording everything you type, especially those precious login details.

4. Man-in-the-Middle (MitM)

A Man-in-the-Middle (MitM) attack occurs when an attacker intercepts communication between the user and a website or service. The attacker can capture login details or session cookies during the login process, allowing them to take over the account.

Think of it like someone eavesdropping on your conversation, gathering sensitive information, and then impersonating you without you ever knowing.

Who are the usual targets of Account Takeover attacks?

Account Takeover fraud doesn’t play favorites, it targets any platform where users have accounts and store sensitive information. However, some industries are particularly attractive to cybercriminals due to the high value of the accounts involved. Let’s take a look at some of the most common targets.

1. Financial

Financial institutions are prime targets for ATO attacks. Whether it’s bank accounts, credit card information, or investment accounts, attackers can access significant funds and valuable data with just a few stolen credentials. 

Once inside, they can make unauthorized transactions, transfer money, or even drain entire accounts. It’s like gaining the keys to a vault, making financial services one of the top targets for cybercriminals.

2. Travel (Flyer miles)

Loyalty programs, particularly frequent flyer miles, are another popular target. Attackers love to target travel accounts because the rewards stored in these accounts, such as airline miles or hotel points, are often highly valuable and can be used for free travel or sold on the black market. 

If attackers can take over an account, they may redeem these rewards or even sell them, making it a lucrative option for fraudsters. It's like finding a treasure chest filled with miles to the next exotic vacation.

3. Retail

Retail and e-commerce platforms are prime targets for ATO attackers. Once fraudsters gain access to user accounts, they can make unauthorized purchases, redeem loyalty points, and exploit promotional offers. These platforms hold valuable customer data and financial information, making them highly attractive to attackers.

Unauthorized transactions can lead to significant financial losses, and stolen products are often sold on the black market or used by the fraudsters themselves.

4. Other sectors

In addition to these industries, many other sectors are also at risk.

Social media platforms, subscription services, and online marketplaces are often targeted, as they all hold valuable user data that can be exploited for various purposes. If a user has an account where they store personal information, financial details, or rewards points, it’s a potential target for ATO fraud.

How to detect Account Takeover fraud?

Detecting Account Takeover fraud early is crucial to minimizing the damage. Fortunately, there are key signs to watch for that can help you spot an attack before it escalates. For more on how to identify suspicious activities like fake account creation, check out our article on how to detect and prevent fake account creation.

Here are some red flags to keep an eye on:

• Unusual login activity: a sudden spike in failed login attempts, especially from unfamiliar IP addresses or locations, can indicate that someone is attempting to break into multiple accounts,

• Account changes: users may report unexpected changes to their accounts, such as a new email address, password reset, or unauthorized transactions. If these changes happen without the user's knowledge, it's a strong indicator of an attack,

• Unfamiliar devices or locations: if your system detects logins from new or suspicious devices, especially if they are geographically distant from the user’s typical location, this could signal an ATO attempt,

• Sudden transactions or purchases: unusual transactions - such as high-value purchases or unauthorized withdrawals - are a clear sign that an attacker has taken control of an account,

• Increased support requests: if users start reporting issues with their accounts, like not being able to log in or noticing unauthorized activity, this may indicate that ATO fraud is taking place.

By actively monitoring these signs, businesses can quickly identify potential ATO attacks and take action to prevent further damage.

How to prevent Account Takeover fraud?

Preventing Account Takeover fraud is all about being proactive. By implementing the right security measures, you can stay one step ahead and avoid major issues down the line.

Here are the essential steps to keep your platform secure:

1. Educate users: your users are your first line of defense, so make sure they understand the importance of using strong, unique passwords. Encourage them to avoid reusing passwords across multiple platforms - it's a small habit that can make a big difference.

Regular reminders about password security and recognizing phishing attempts can help users stay vigilant and protect their accounts more effectively.

2. Strengthen authentication: Multi-factor authentication (MFA) adds an extra layer of protection. Think of it as an additional safeguard that makes it harder for attackers to gain access even if they have the correct password. MFA is a straightforward but highly effective way to keep things secure.

3. Protect verification processes: when users change account details or reset passwords, ensure there are extra verification steps in place. This could include confirming changes via email or SMS. By adding a layer of verification, you make it significantly more difficult for attackers to take control, even if they’ve gained access to the account.

By implementing these straightforward measures, you’ll significantly reduce the risk of Account Takeover fraud and keep your platform secure.

What tools can help combat Account Takeover fraud?

To effectively prevent Account Takeover (ATO) fraud, it’s important to leverage a range of tools designed to detect and block suspicious activities in real-time.

Here are some key tools that can help secure your platform:

• Fraud prevention API are designed to monitor user activity continuously, analyzing data points like IP addresses, login times, and device fingerprints. These tools help detect unusual or malicious login attempts, allowing businesses to take immediate action, such as blocking access or requiring further verification steps, before fraudsters can exploit the account.

• Behavioral analytics tools analyze the typical behaviors of legitimate users, such as their typing speed, mouse movements, and navigation patterns. By establishing baseline user behaviors, these tools can quickly identify anomalies that suggest account takeover attempts, providing alerts for further investigation or automatic countermeasures.

• Risk-Based Authentication (RBA) dynamically adjusts the level of security based on the risk of a login attempt. If a login is attempted from an unfamiliar device, location, or IP address, RBA can prompt the user for additional verification, such as a one-time password (OTP) or biometric confirmation, ensuring that only legitimate users can access their accounts,

• IP geolocation tools track the physical location of users based on their IP addresses. If a login attempt is made from a location far outside the user’s usual pattern, it triggers an alert or a request for additional authentication, helping prevent unauthorized access from unfamiliar or high-risk locations.

By utilizing these tools, businesses can significantly reduce the risk of Account Takeover fraud, ensuring a secure environment for both their users and their data.

Account Takeover (ATO) fraud is a serious and growing threat, but with the right tools and proactive measures, businesses can protect themselves and their users from significant losses. By educating users, strengthening authentication processes, and utilizing advanced fraud detection tools, you can stay one step ahead of attackers and safeguard your platform.

Ready to enhance your platform’s protection against ATO fraud? Try Prelude for free or contact our sales team to learn more about how we can help safeguard your platform.