As consumers shift away from brick and mortar shops, online shopping has become one of the most popular online activities worldwide. Global eCommerce is predicted to approach $5trn worldwide by 2021
However, this proclivity for online shopping has resulted in an increased risk of eCommerce fraud, an ongoing problem for merchants and credit card companies, growing at twice the rate of e-commerce sales. Fraudsters are always looking for the weakest link in the chain and emerging online retailers are often the perfect target because they’re focused more on speed and user experience and less on security, making them vulnerable.
To combat this risk, many online retailers assess fraud risk at the point of transaction – adopting a reactive measure rather than a proactive one. By investing in fraud detection and prevention solutions that verifies a users’ identity and cross-references it against fraud data before allowing them to transact, these merchants can curb significant fraudulent losses.
Card not present (CNP) fraud, a type of credit card scam in which the customer does not physically present the card to the merchant during the fraudulent transaction, has already resulted in unsurmountable losses. It’s expected retailers will lose around US$130 billion in digital CNP fraud between now and 2023.
Luckily, smarter data can help weed out these problems, especially when verifying identities at account creation. All transactions leave a data trail, even the fraudulent ones. Every eCommerce transaction involves data – a name, shipping address, credit card number or other personal information. Data fuels the transaction by helping to define, authenticate and verify identities, ensuring that the right person receives the right goods and services. But data can be smarter, or at least used in a smarter fashion to verify identities and detect eCommerce fraud before it reaches the point of completion.
Moreover, the use of specific data points can create barriers that prevent criminals from gaining access to eCommerce accounts while simultaneously authorising legitimate customers to effortlessly access their accounts. In mere seconds, data can be referenced, verified and used to prevent a fraudulent transaction – saving online retailers time, money, and resources – while allowing legitimate customers to easily and efficiently complete a sale.
Many eCommerce merchants are also tapping into rapidly expanding markets around the world. Take, for example, the fact 71 percent of European shoppers buy cross-border. At the same time, many of the fastest growing markets are also considered some of the riskiest for fraud. More often than not, these emerging markets don’t have efficient systems in place for identity verification. However, mobile phones are proving to be an effective tool for identity verification.
Customers are increasingly using their mobile devices for eCommerce and financial transactions. One example of identity verification and authentication through mobile devices includes two-factor authentication – a process that matches mobile identity attributes utilising mobile network operator’s (MNO) information to confirm an identity. Additionally, mobile data can be used to verify the user’s identity by cross-referencing Mobile Network Operator (MNO) data for identity matching, proximity location, device information and call forwarding statuses.
As eCommerce continues to grow, so does the risk and cost of fraud – with CNP fraud and cross border fraud being only two examples of the growing types of online fraud. Fraudsters will always go for the easiest, fastest and most lucrative payoffs and that means targeting retailing sites that do not employ vigilant, vigorous practices for verifying customers and identifying potential fraud. Using smarter data, however, can reinforce fraud defences, which can go a long way toward curbing eCommerce fraud.
Zac Cohen, general manager at Trulioo