3 Reminders about Online Payment Fraud in 2020

At the international scale, online companies and their clients suffer billions of dollars in fraud losses yearly. There are a number of critical things ecommerce businesses should bear in mind.

Begin with a definition. “Ecommerce fraud” describes several types of payment or identity fraud where a criminal or criminals use fake or stolen payment information to place an internet order. If the order is sent, the crook or crooks can collect their booty by having it sent to, say, a freight forwarder or snatching it from a front step.

These crimes have a lot of victims. There’s the individual whose payment card or other payment information was stolen. Fortunately, these people will be reimbursed normally. Alas, the merchant that processed the fraudulent order will typically provide that reimbursement.

Thus the merchant is the next victim. Oftentimes, the merchant will shed any product the fraudster ordered, refund the individual whose payment information was stolen, and cover related credit-card chargeback fees.

In the North American variant of its 2017″Online Fraud Benchmark Report” (PDF), CyberSource said that an internet business could expect to shed 0.8 — 0.9 percentage of ecommerce sales to fraud annually.

Even though a fraud reduction of 0.8 — 0.9 percent may not seem like much at first, it’s roughly 1 percent of gross earnings. If a organization’s margin was 20 percent, this could be approximately 5% of profit. Source: CyberSource.

There can also be third parties changed. A single parent who replied a”work at home” advertisement on Craigslist may have the local authorities knock on her door to tell her she’s under investigation for forwarding stolen land.

Merchants face a balancing act. On the one hand, they would like to minimize fraud. But rejecting every purchase with a unique ship-to address or another billing address could anger valid shoppers, damaging sales.

To help put this issue into perspective, here are 3 things ecommerce operators ought to know.

Online Fraud Growing

“With 16.7 million reported victims of identity fraud in 2017…it was another record year for the amount of fraud victims,” according to a Experian report, adding,”Last year, we saw over a 30-percent growth in ecommerce fraud strikes compared to 2016.”

While there are theories suggesting why ecommerce fraud is on the increase, two stand out.

The EMV chip placed in bodily payment cards may be shifting fraud from in-store to internet.

“Now 90 percent of credit cards have a chip in them, and nearly all major retailers have changed their point of sale payment systems,” composed Matt Tatham, director of articles insights at Experian Consumer Services.

“The great news: Visa discovered that counterfeit card fraud has declined 52 percent since merchants started using chip-enabled cards. The bad news: offenders are migrating their fraud action on the internet in which a physical credit card isn’t necessary.”

Another fraud driver might be the availability of stolen customer info. While reported data losses were down in the first quarter of 2020, according to an IBM SecurityIntelligence report, there were still 686 data breaches reported in the first few months of the year, representing over 1.4 billion exposed documents.

Over a billion stolen documents in only a three-month period could allow a good deal of ecommerce fraud.

Mobile Fraud Coming

Mobile commerce is increasing. In 2020, 17 percent of online merchants surveyed for Kount’s”The State of Mobile Payments and Fraud” 2020 report stated they earned over half of the ecommerce revenue from mobile orders.

The same report estimated that in only a couple decades, one in five online retailers could be deriving up to 32 percent of sales from mobile.

Now think about that mobile payments may differ from other ecommerce payments. Mobile shoppers might be more likely to use mobile wallets, payment options like PayPal, or cyber monies.

These factors leave questions regarding whether and how mobile commerce fraud prevention will differ from desktop.

To deal with this, ecommerce operations should start to monitor ecommerce fraud by station. They can then identify mobile commerce fraud and make significant profiles for fraud prevention.

In the long run, it might be that fraud avoidance will appear exactly the exact same for both desktop and mobile orders. But it may not.

Fraud Prevention Costly

There are a lot of automatic fraud prevention tools.

However, bear in mind that overzealous ecommerce fraud prevention can be costly too.

“The Merchant Risk Council’s 2017 International Fraud Survey showed that the typical online shop dropped 2.6 percent of all incoming orders because of fear of fraud, including 3.1 percentage of all orders worth over $100,” composed Riskified’s marketing manager, Shalhevet Zohar, in a recent blog post. “For a $25 million company, this means rejecting orders worth more than $600,000 annually.”

Ecommerce businesses will need to minimize both fraudulent transactions and false positives.

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