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eCommerce losses to online payment fraud to exceed $25bn annually by 2024

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Payment fraud is on the rise as shoppers embrace ecommerce
Payment fraud is on the rise as shoppers embrace ecommerce
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Payment fraud set to grow as more shoppers move online, while the coronavirus is opening up immediate scams that merchants need to be aware of

Ecommerce merchants are set to lose in excess of $25bn to online payment fraud by 2024, from just of $17 billion in 2020, despite the ongoing implementation of SCA (Secure Customer Authentication) in Europe.

 

The new study from Juniper Research, Online Payment Fraud: Emerging Threats, Segment Analysis & Market Forecasts 2020-2024, finds that the popularity of eCommerce and increased card-present security with the introduction of EMV, have made eCommerce payments a compelling target for fraudsters.

 

The research highlighted that eCommerce merchants outside Europe must adopt similar measures to SCA, including two-factor authentication, or they will suffer from increasing levels of sophisticated fraud. Payment gateways will be vital to ensure that these security requirements are implemented at scale.

 

Juniper observed that as well as implementing further payment security measures, eCommerce merchants must take on a more educational role for their users. This role will primarily be education about cybersecurity practices, common fraud methods and changes to the checkout process to improve fraud mitigation. This will be essential in China, which will account for 42% of all eCommerce payment fraud in 2024.

 

Research co-author Nick Maynard explains: “The explosion of eCommerce means that fraudsters have evolved their tactics, and so merchants must also evolve. eCommerce merchants must educate their users in anti-fraud best practice, as the human element is consistently the most vulnerable to exploitation in the online payments ecosystem”.

 

The research also identified that while additional security measures, including two-factor authentication, must become more widespread, merchants must be careful when implementing these changes. Increased friction in the checkout experience must be minimised, or merchants will face increased cart abandonment rates. Juniper Research recommends that security vendors work with merchants to build security measures into shopping apps that ensure a low-friction user journey, whilst encompassing increased authentication requirements.

 

Wider fraud in ecommerce grows

A separate study by Forter, meanwhile, points to other fraud hotspots that are starting to crop up during the Coronavirus pandemic, driven by the increase in online shopping.

 

It found that, with a 50 to 100% increase in online shopping, new ecommerce scams are appearing. It warns retailers to be on their guard, primarily, for contactless shipping and delivery fraud and promo abuse.

 

It warns that Contactless Shipping and Delivery – when physical goods are delivered to shoppers’ specified address, but there is no interaction between individuals in order to minimize the potential for exposure – is ripe for abuse. Merchants in this category should also prepare for an increase in Buy Online Pickup In Store (BOPIS) as a potential segment to monitor for friendly fraud. Friendly fraud related to BOPIS is likely to occur as purchases made prior to movement restrictions may bring about the inability for customers to actually pickup their orders both because they cannot get to the store and because the store may be closed.

 

Additionally, if shoppers pick something up at the store and then wish to return it, they will be limited for the reasons detailed above.

 

Merchants should proactively address the issues surrounding Corona and the virus’ potential impact on their business and their policies (including returns policies and promo/coupon policies). By pre-emptively addressing the impacts of the virus on changes to business practices or policies, it is likely that merchants will face less friendly fraud (where good customers aim to take advantage of merchant’s policies for their own gain) and incidences of abuse.

 

Promo abuse, meanwhile, occurs when legitimate customers or fraudsters create new/multiple accounts to receive one-time use promotional codes that they use multiple times, or when shoppers overshare coupon codes in refer-a-friend activities. As merchants aim to draw in more customers during this time, there has been an increase in the offering of promotions or discount codes in order to further entice consumers to their brands. Merchants must ensure that they have proper fraud and abuse protections in place in order to combat a likely significant uptick in promo-related abuse.

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