Online shoplifting: ecommerce fraud rises by 59%

Online payment fraud has increased by 59% in the last month, according to a study conducted by a fraud prevention platform.

Account takeover (51%), promotion abuse (52%), refund abuse (53%) and customer or friendly fraud (40%) have similarly become more frequent, ringing alarm bells for online merchants.

Ravelin conducted a survey with over 1900 global fraud professionals to find that ecommerce fraud is fast becoming a crisis for ecommerce businesses.

As a result, 58% of UK-based online businesses plan to grow their fraud teams in the next 12 months.

What does online shoplifting look like?

The most common ecommerce crimes are related to transactions made with stolen credit card numbers.

To scam an online business, a fraudster first acquires a credit card number and uses it to pay for something online. The store then processes the payment and the real cardholder – noticing an unusual transaction – initiates a chargeback.

The chargeback is completed but responsibility falls on the online store, meaning they lose the money.

Nevertheless, there are other more complex types of frauds that are targeting small businesses. Namely, this includes triangulation fraud.

In a nutshell, this occurs when a customer makes a genuine purchase on a third-party marketplace like Amazon or eBay. In this scenario, the fraudulent merchant has a digital storefront and accepts orders. However, they’re using stolen cardholder data to purchase goods from a third party and ship them to the buyer.

Because of all the parties and processes involved, it is difficult to trace the wrongdoers. For instance, platforms like Shopify or payment gateways like Stripe do offer built-in ecommerce fraud detection and prevention but their tools are not advanced enough to flag triangulation fraud.

Investing in new and advanced technology is therefore paramount.

Building a virtual shield against ecommerce fraud

Ravlin predicts that global losses to ecommerce fraud could exceed $48 million in 2023. Accordingly, the global fraud detection and prevention market is set to exceed $190 billion in 2030 as businesses seek ways to protect their operations from scammers.

In order to safeguard their account books, ecommerce businesses find themselves looking for new approaches to prevent fraud.

Martin Sweeney, Ravlin CEO, explains, “Over the years, merchants have built up fraud investigation teams which they’re justifiably proud of. But fraud continues to grow and mutate: simply throwing more people and money at the problem won’t make it go away.”

Staying one step ahead against fraudsters equires pragmatism and adoption of new technologies.

In fact, machine learning and two-factor authentication are being adopted more regularly by ecommerce businesses to help with the issue. 48% of UK businesses say machine learning is one of the most effective tools in their arsenal. 75% say two-factor authentication is crucial.

Sweeney notes that adopting new technologies is key. “Businesses need to get on the front foot managing fraud: using automation to nop fraudulent transitions in the bud,” he says.

“Better automation helps teams scale and frees up fraud investigators from mundane tasks, enabling them to focus on informing product development, identifying other sources of profit erosion, and other more important strategic tasks that drive growth.”

Training the machines to prevent fraud

When it comes to tackling fraud, 78% of businesses opt for in-house solutions. However, if this solution is to be sustainable, businesses should consider upskilling their workforce rather than blindly embracing automation.

Although the trend for workplace automation is growing, only one in ten global workers have the necessary artificial intelligence know-how to implement it.

In fact, a study by Virgin Media O2 found this digital skills gap is costing the UK economy £12.8bn.

Businesses willing to invest in upskilling their in-house teams will be better positioned to use the technology across all its operations, including in preventing fraud.

As Sweeney points out, “With the economy in an uncertain place, enabling growth must become the priority.”