Ecommerce fraud is growing fast and financially impacting businesses across the globe, according to new research from Ravelin. Online payment fraud, or card-not-present fraud, is a type of fraud in which a fraudster steals payment information to make unauthorised transactions.
In the last twelve months, merchants have seen a huge leap in online payment fraud (up 59%). This includes account takeover (up 51%), promotion abuse (up 52%), refund abuse (up 53%) and customer fraud/friendly fraud (up 40%).
Merchants are throwing more and more money at the crisis and expanding fraud teams in a bid to mitigate losses. Three-quarters (75%) of all online merchants say fraud budgets will grow this year (global average figure). In the UK, 62% will be spending more on managing fraud. This rises to 70% in France, 74% in Germany, 69% in the US, and 84% in Canada.
In the UK, 58% of online businesses polled plan to grow their fraud teams in the next twelve months. In other parts of the world, the trend is even more pronounced. 80% of merchants in Germany, 72% in the US, and 86% in Australia expect teams to grow in size, Ravelin has found.
New ways to fight fraud
New approaches are urgently needed to fight fraud and minimise losses. But when it comes to tools for tackling fraud most businesses (78%) opt for in-house solutions. However, these are expensive to maintain and quickly become unsustainable as a business grows. In the UK the figure is 80% while in France it’s 81% and in Germany 77%.
Ravelin CEO, Martin Sweeney said, “Over the years merchants have built up fraud investigation teams which they’re justifiably proud of. But fraud continues to grow and mutate. Simply throwing more people and money at the problem won’t make it go away. Losses will continue to grow.
“Businesses need to get on the front foot managing fraud and using automation to nip fraudulent transactions in the bud. Better automation helps teams scale and free fraud investigators from mundane tasks enabling them to focus on informing product development. Identifying other sources of profit erosion, and other more important strategic tasks that drive growth. With the economy in an uncertain place, enabling growth must become the priority.”
Ravelin’s Global Fraud Trends 2023 survey also examines the most effective tools for fighting fraud. Machine learning and two-factor authentication (2FA) are being adopted more regularly by eCommerce businesses to help with the issue. Almost half (48%) of UK businesses say ML is one of the most effective tools in their arsenal. Three-quarters (75%) of UK merchants say 2FA is crucial.
From feedback across regions, the survey found there is not a singular ‘one and done’ fraud strategy that is effective. Different solutions are effective at fighting different frauds. The report suggests having a robust tool stack allows teams to consider the complex nature of fraud.
Chargeback woes
The survey spoke to 1900 global fraud professionals, and examined the increase of ‘newer’ types of fraud which are prevalent globally. Policy abuse is experienced by 40% of businesses spoken to. The UK has the biggest problem with this type of ‘friendly fraud’ with 52% of merchants experiencing it.
Reseller and bot activity sits at 53% globally. ‘Fraud as a service’ schemes were an issue for 56% of those spoken to. Social engineering via customer service was experienced by 45% of the companies who took part in the survey.
Chargeback fees as a result of fraudulent transactions are a huge pain. They cost between $20 – $100 and companies stand to lose more than double the transaction amount.
Survey methodology
Commissioned by Ravelin and carried out by Qualtrics, the survey was carried out using a panel of 1,900 global fraud professionals. Survey participants work for online merchant businesses with over $50 million in annual revenue. The survey was translated into each respondent’s local market language for clarity.
Enterprise Times: What this means for business.
There are over 24 billion stolen credentials floating around on the dark web. In October 2022, a dark web marketplace released over a million stolen credit cards, allowing anyone to download them for free. For brands and retailers getting the balance between stopping fraud and delivering a seamless customer experience is a challenge. Furthermore, almost 90% of UK customers abandon purchases when faced with friction.
As a result, enterprises must look to technology to fight the type of frauds outlined in their report. Ravelin says enterprises can use their tools to tackle multiple forms of fraud, including online payment fraud, account takeover, voucher/refunds/returns abuse and marketplace supplier fraud. The company specializes in creating tools that enable fraud teams to make the best use of their own business data when making decisions on fraud and payments.
Irrespective of the fraud prevention vendor, retailers and brands must look to third-party tools to combat fraud. The days of ignoring or tolerating a low level of fraud are no longer acceptable. New solutions are desperately needed as businesses struggle to address spiralling levels of fraud.
