Merchant Fraud Journal’s 2020 Trends Report
Technology is a great thing — until it’s not. While e-commerce merchants appreciate that today’s technology can help them reach new markets and grow their sales, they also know that it lets cybercriminals create new ways to defraud honest merchants and their customers.
But how can merchants protect themselves against fraud risks they might not know exist?
The new free “Ecommerce Fraud Trends 2020” report, published by the Merchant Fraud Journal, provides valuable insights into the fraud threats e-commerce merchants need to prepare for in the coming year — insights directly from 13 of the leading e-commerce fraud prevention solutions.
In the report, ClearSale’s own Rafael Lourenco offered his thoughts on the three trends that will be taking center stage in 2020. The report also shares top expert opinions on how PSD2 will affect fraud prevention in Europe and the biggest merchant fraud trend that’s flying under the radar.
For merchants who want to protect themselves and their customers next year and beyond, here are the e-commerce fraud trends that top prevention specialists are thinking about.
The Threat: Organized Fraud Attacks
According to Lourenco, organized fraud attacks are one of the biggest problems in the e-commerce market. The reason? Merchant’s tend to only think of fraud as a single entity – which means they often miss larger fraud patterns at play. This is a problem because larger, organized fraud schemes are becoming more and more common, where e-commerce criminals pull off large-scale rip-offs while circumventing fraud prevention solutions that aren’t prepared to manage these coordinated attacks.
The Defense: Group Analysis
Group analysis can help merchants deter these large-scale attacks, says Lourenco. This approach enables merchants to monitor the big picture and identify changes in the normal patterns of purchases. As a result, they can more easily spot and stop organized fraud attacks.
The Threat: Identity Verification
Identity verification is a major challenge for e-commerce merchants. One solution is to require customers to set strong passwords, such as requiring a complex combination of special characters, numbers, and upper- and lowercase characters. Requiring multifactor authorization is another option.
And yet, even this may not be enough. While these approaches may help deter some fraudsters, they’re not foolproof. And worse, these approaches add significant friction to the checkout process, which can impede conversions and hurt revenue.
The Defense: Zero-Factor Authentication
Datavisor’s Dr. Yinglian Xie suggests companies will start exploring the use of zero-factor authentication, which uses advanced technologies such as artificial intelligence to build a customer’s “digital DNA.” By integrating online behaviors across devices, activities, and biometrics, zero-factor authentication creates a unique profile for each customer that may be harder for a fraudster to crack.
The Threat: Account Takeover
Although account takeover (ATO) fraud is nothing new, many top fraud prevention providers believe merchants (and even some fraud prevention teams) aren’t taking the threat as seriously as they should.
ATO fraud costs merchants and consumers an estimated $5.1 billion worldwide in 2018, up 120% from 2017, and the growing number of data breaches in 2019 means ATO fraud won’t be slowing down anytime soon. ATO fraud can be highly lucrative for fraudsters, and the success rates for ATO attacks is high.
The Defense: Machine Learning Models and Biometrics
Many retailers are using machine learning to flag fraudulent payments, and this can also be extremely useful in identifying account takeover behaviors. Additionally, merchants can combine behavioral analytics, behavior biometrics, and device intelligence to protect against account-related fraud without significantly increasing customer friction. The result is full coverage of a customer’s behavior from the first time they log in until they check out.
Staying on Top of E-Commerce Fraud Trends
E-commerce fraud is evolving rapidly, and these are only three of the many fraud threats merchants must be aware of. The way online retailers respond to these fraud threats is critical.
Some merchants opt to tighten fraud controls, which can result in lower chargeback rates but higher false decline rates and unhappy customers. Others choose to do nothing, assuming the fraud prevention features that are built into their e-commerce platform will be enough to protect them against scams. Unfortunately, both schools of thought will likely end up costing merchants significant amounts of time, money and manpower.
That’s why today’s merchants need to take a proactive stance against fraud by identifying and minimizing the vulnerabilities in their online store. At ClearSale, we’ve seen how our unique combination of advanced artificial intelligence and highly trained analysts can make a big difference in reducing risk exposure.
If you’re ready to learn more about the risks your business is facing, contact us today. We’ll help you find the solution that can protect your business and your customers.