“People are getting more creative and sophisticated in their fraud schemes,” explains Red Cross spokesperson Devorah Goldburg. She was speaking about the false claims after a natural disaster, but she could well have been talking about the account takeovers and financial theft that is a constant annoyance and continuous threat to online retailers.
Types of Digital Fraud
Security experts have described digital fraud as “the new normal” and attacks of one form or another were up 150 percent in the first half of 2017 compared to the same period in 2015. Types of cyber assault include:
- Data breaches.
- Account takeovers.
- Identity theft.
- Coupon abuse.
- False account creation.
- Stolen credit cards.
Online Merchants Must Remain Vigilant
Online merchants are fighting back and there is a lot of evidence that their efforts are paying dividends as digital scam activity appears to be leveling off as we head into 2018. However, countermeasures entail costs too.
For example, false positives or denials of sales due to suspicion of fraud is both an expensive and growing problem. In North America alone, 2.9 percent of online transactions are improperly rejected (so called false positives) because a valid customer order was mistakenly flagged as fraudulent. These false positives not only hurt sales, but they also insult the buyer (which has a devastating impact on your brand’s image and the consumer’s loyalty).
Alarming Facts About E-Commerce Scams
By the way, here are some facts about fraud that every e-commerce merchants need to be aware of:
- Account takeover fraud rose an alarming 45 percent in the 2nd quarter of 2017 alone.
- Card-not-present fraud losses are expected to top $7.2 billion by 2020.
- Chargebacks fees have been rising dramatically and will cost merchants as much as $22.5 billion in 2017.
Thankfully, there are smart solutions in the market to help combat online fraud. Signifyd is one solution that provides a 100% fraud protection guarantee for every online transaction it approves. This tool is natively integrated into the Magento Commerce 2.2, which means you’ll ease the worry about rejecting a valid customer or losing money due to fraudulent activity. There are several other fraud solutions available that should also be considered from companies like Kount, Riskified, CyberSource and Forter. All of these fraud solutions are designed to allow you to spend less on security, less time and cost doing manual review of orders and administrative overhead and dedicating more resources where they’ll matter the most--on the marketing, selling, and the creative activities that truly drive growth.
Data breaches at Equifax, the U.S. Securities and Exchange Commission (SEC), Deloitte, and Whole Foods show that online fraud is both pervasive and a growing problem. A Juniper Research study highlights some of the reasons why this challenge is not going away. They include:
- Rapid commerce growth.
- Increasing money flows into the digital sector.
- The use of mobile payments.
- Frequent data breaches.
- The post-EMV CNP fraud influx (Every other country that has adopted EMV has seen a precipitous increase in attacks on the CNP channels, and the United States will be no exception).
Every player affected (merchants, issuers, acquirers, processors, and service providers) recognizes the need for a collective strategy towards e-commerce fraud. Unfortunately, existing legislation has not fostered such a collaborative approach.
Instead, each player is trying to pass the fraud liability to a different party downstream. In contrast, every stakeholder needs to make a shared commitment towards combating fraud on an enterprise and industry level.
Undoubtedly, the rising tide of e-commerce sales is also lifting the prospects of the fraudsters. Your company needs to be prepared from the beginning to the end of the transaction process. Contact Guidance to help determine the best and most cost effective fraud solution for your business.