According to reporting from Statista earlier this year, 75% of eCommerce businesses worldwide saw an increase in fraud attempts in 2021 compared to fraud attempts prior to the onset of the pandemic. Furthermore, security breaches that led to online payment fraud were estimated at a staggering $20 billion last year. And Juniper Research predicts that losses to online payment fraud will surpass $206 billion cumulatively for the period between 2021 and 2025.
As a result of these scary eCommerce fraud statistics and predictions, retailers need to take extra precautions if they want to avoid becoming the victim of a major data breach or financial loss. In this post, we explore three eCommerce fraud trends that are on the rise in 2022 and highlight fraud prevention trends you can adopt to protect both your business and your customers as peak season looms.
Account Takeover Fraud is Leading the Pack
Coming up with a strong (and unique) password isn’t easy—especially when you have dozens of accounts with different retailers, email providers, and apps. But not having a solid password is a far bigger headache, as you unwittingly expose yourself to fraudsters.
Account takeover fraud—a type of identity theft where a hacker takes control of your digital identity for financial gain—is prevalent and on the rise. In fact, recent research found that 22% of U.S. adults have been victims of account takeover fraud —amounting to over 24 million households. Another 2021 study revealed that 43% of U.S. eCommerce businesses reported that account takeover fraud accounted for over 10% of chargebacks.
With so many fraudsters attacking unsuspecting consumers, how do retailers and eCommerce brands help consumers protect themselves from account takeover fraud without creating too much friction in the customer experience?
There are two ways. One is to incorporate dual authentication measures to ensure that the person accessing the account is the customer who owns it. This can be done by sending a code via text, email, or phone call or by asking for the answer to a security question.
However, option two is arguably the best choice for retailers looking to remove friction points from the customer experience. Retailers can use biometric “passwords”—like iris, fingerprint, or facial recognition scans—instead of keyed passwords to guarantee the authenticity of the customer.
Given that these “passwords” can’t be replicated by fraudsters—and that they only require a single entry—biometrics offers a faster and more secure way to give customers access to their accounts. It’s also well-suited to mobile shopping experiences.
Bots Are Getting Smarter
In the past, bots were much easier to spot and stop. They could only automate repetitive tasks (like clicks and data entry), and they were unable to perform complex operations that required critical thinking like CAPTCHA requests.
But that’s changing. Fraudsters are advancing their nefarious technologies to enable bots to set up fake accounts by solving CAPTCHA requests. As time goes on, these intelligent algorithms will only get better at solving complex authentication puzzles.
This puts retail and eCommerce businesses in a difficult situation, as getting ahead of bots requires speed and accuracy that human employees simply don’t have.
Fortunately, you can solve this problem by adopting machine learning fraud detection like Radial’s full-service Payments, Tax, and Fraud solution. By layering machine learning on top of consortium data and human analysis, Radial enables your team to spot bots and fraudsters before they can carry out their crime.
And since we offer a zero fraud liability guarantee, you never have to worry about the fallout of any fraudulent attacks on your system. You and your customers are protected on all sides.
Customer Experience and Fraud Prevention Are at Odds
Legitimate customers don’t want to deal with fraud, but they also don’t want to deal with arduous fraud prevention tactics—especially at checkout. If they’re falsely declined, they’re much more likely to abandon their cart and take their business elsewhere.
Retailers don’t have to choose fraud prevention over the customer experience (CX) to keep out fraudsters, though. In fact, many fraud prevention solutions operate seamlessly (almost invisibly) in the background. And because these “invisible” solutions are much less likely to turn legitimate customers away, you also don’t have to risk your customer loyalty to ramp up security. The CX and fraud prevention can work together in concert.
With your reputation and financial health—not to mention your customer experience, well-being, and loyalty on the line—you can’t afford to have fraudsters running rampant on your eCommerce website or in your store. Luckily, there are quite a few fraud management trends you can take advantage of to mitigate the risk.
For the foreseeable future, that means creating strong dual authentication and biometric passwords, using machine learning to detect fraudsters early, and making your fraud prevention methods invisible to the customer.