According to LexisNexis research, fraudulent payments are 40% more likely to occur in e-commerce than in brick-and-mortar stores.Exploring the true cost of fraud: e-commerce and retail report” The 14th annual study released on March 27, 2024 found that digital wallets, payment apps, buy now, pay later plans, and cryptocurrencies account for one-fifth of all payment fraud. It turns out that
Based on a survey of 346 risk and fraud executives in the US (272) and Canada (74), the study found that attacks will increase by 60% in 2023 compared to the previous year . fraudulent chargeback and identity theft. Researchers advised that AI technology is the best defense against such attacks.
“Advanced real-time transaction validation solutions using artificial intelligence and machine learning are particularly important as they work in the background to prevent fraudulent transactions with minimal impact to customers,” the researchers wrote. wrote, emphasizing that these advanced technologies are the best defense against large-scale fraud. Automated Attempt.
High cost, mass production
The researchers noted that fraud costs a lot of money. Fees, fines, and the cost of replacing products can result in sales lost to fraud approximately three times their original value. These costs will only increase as fraudsters continue to exploit weaknesses in back offices and payment processing systems, they added.
The report identified the top three attack schemes for all merchants (online and in-store): synthetic identity fraud, payment card fraud, and malicious bot attacks. Researchers also found that card-not-present fraud (25%) is more common than other forms of fraud, including counterfeit cards (22%), stolen or lost cards (20%), stolen card IDs (17%), and counterfeit or lost cards. also found that it outperformed all forms of payment fraud. Altered card fraud (17%).
Researchers have found that in the current threat environment, separating fraudsters from legitimate customers is especially difficult, especially in digital transactions. Survey respondents use mobile his channels (47%), synthetic identity (47%) and limited or no real-time transaction tracking tools (46%) are cited as the top three challenges for digital consumer authentication.
frictionless tools
69% of survey respondents have implemented fraud prevention tools in digital channels, but most respondents find it difficult to weed out fraudsters without inconveniencing legitimate customers, especially at the time of purchase . Researchers provided the following recommendations to create a safe and smooth experience:
Adopt advanced multi-layer solutions. Eliminate friction among low-risk shoppers with automated solutions like transaction scoring. Transaction scoring creates a risk score for approving or rejecting transactions and eliminates unnecessary steps in customer verification. When integrated with AI, biometrics, and other behavior-based authentication methods, these anti-fraud tools continuously assess customer identity and transaction risk, facilitating internal and external authentication. Data sharing and collaboration.
Appoint a fraud management administrator. Assign an administrator to be responsible for your company’s fraud management and be responsible for configuring, monitoring, maintaining, and continually updating the system. This designated administrator protects the customer journey from account opening to checkout to login, protecting all parties (employees, customers, and service providers) from card payment fraud and related threats. approach.
A risk-based, data-driven approach. Prioritize fraud mitigation to succeed in the e-commerce ecosystem. Leverage new technology wherever possible to build a robust fraud posture and reduce fraud losses, increasing conversions and trust.
Human and AI surveillance
As LexisNexis pointed out, the growth of e-commerce has created more opportunities for criminals with surprisingly little effort. According to research from Verizon, a significant number of attacks in 2023 were caused by human error.Data Breach Investigation Report” Published on May 1, 2024.
Chris Novak, senior director of cybersecurity consulting at Verizon Business, said 68% of data breaches in 2023 will be caused by people making innocent mistakes or falling victim to social engineering attacks. I said that there is. “The continued involvement of human elements in breaches shows that there is still much room for improvement when it comes to cybersecurity training,” he said in a statement.
Verizon Business’ data breach team advised taking a multi-layered approach to fraud prevention. “As we (and many others) have said before, multi-factor authentication can go a long way in mitigating these types of attacks. “Don’t let your kids use the company computer to find out how to make something,” they wrote. “As with anything else security-related, the most effective controls are usually those that leverage the human element in conjunction with technical resources.”
LexisNexis Risk Solutions proposed going beyond personal attributes such as name, address, and date of birth to identify customers in the digital world. Merchants must also assess device risk, transaction risk, and online and mobile behavior. Researchers say AI-powered tools can do all this and more, calling the approach “a new standard for fraud management.”
