Online payment fraud could cost retailers $130bn between 2018 and 2023, according to Juniper Research.
The analyst company says that fraud for Card-Not-Present (CNP) transactions, is growing rapidly, due to more sophistication among fraudsters, and lack of preparedness among online retailers.
Juniper's new research, Online Payment Fraud: Emerging Threats, Segment Analysis & Market Forecasts 2018-2023, highlights that percentage growth in fraud attempts has outstripped growth in e-commerce since 2015, and fraudsters are continuing to take advantage of online payment for fraud.
With more digital and cardless options for payment becoming available, there more options for fraudsters, Juniper said, and cybercriminals are also selling their expertise to less tech-savvy fraudsters, so complex cross‑channel fraud is becoming the ‘new normal'.
The report notes that previously for online retail, payments were made via CNP (Card Not Present) transactions, or through wallets such as PayPal. Presently, the wallet landscape has expanded dramatically since the early days of PayPal, while new pay-by-bank schemes such as SCT Inst in the EU, or Zelle in the US have created more choice for consumers. Additionally, the banking world is becoming more open; an API-driven world has created ‘banking-as-a-service' opportunities and allowed new players to enter the market as a result.
Fraudsters have been quick to exploit new systems, Juniper added, such as the 2008 launch of the UK's FPS (Faster Payments System) which saw a 132% increase in fraud, on account of ill-preparedness on the part of service providers.
The report found that that eCommerce merchants remain, to a large extent, focused on assessing fraud risk at the point of transaction. The rise of digital identity theft, and targeted theft of card and payment data from retailers, however, means that criminals are able to gain ‘authentic' account data more easily and use this for fraudulent transactions, negating basic checks at time of transaction.
Retailers are also failing to carry out analysis in terms of
session and behavioural monitoring, or validating the identity of a user to
assess fraud risk before any transaction. Juniper cited industry perception of
FDP (Fraud Detection & Prevention) as one of the reasons behind this, with
FDP seen as a high-cost tool used only to prevent fraud.
"A layered FDP solution naturally helps directly preventing fraud, but it also offers major gains in terms of recovering potentially lost revenue through false positives. This is something about which retailers remain undereducated, and has allowed fraudsters to capitalise on relatively low FDP spend," explained research author Steffen Sorrell.
Juniper found that the perception of FDP return on investment on the part of retailers is, in turn, hampering global FDP spend growth. Juniper anticipates that digital payment players will spend $9.6 billion annually on FDP solutions in 2023, although the bulk of growth over the forecast period is likely to be driven by financial institutions and payment service providers. This is due to awareness of FDP benefits, as well as a requirement to deal with challenges such as open banking systems and instant payment mechanisms.