Covid-19 has forever changed the way consumers shop, creating a strong desire for digital payments and the rapid shift towards ecommerce.
Recent data from Australia Post marked November 2021 as the largest month in Australian online shopping history, a significant jump with online retailing surging by 13 per cent from November 2020 and 76 per cent when compared to November 2019.
With Aussies spending most of 2021 in lockdown, it’s no surprise that online shopping skyrocketed over Christmas. But while holidays are a time for celebrations, they’re also a time for shoppers to be on alert. Such events are often tainted with fraud and scams, with cyber criminals taking advantage of the increased amount of spending from the average consumer. This was reflected by data from ScamWatch reporting that Australian shoppers lost an approximated $14 million during the Christmas period over November and December, making them the most profitable months for scammers.
The costly impact of fraud
According to the Australian Payments Network (APN), while the number of people who experienced card fraud remained fairly stable in 2020, rising by only 0.6 per cent to $467.6 million, card-not-present (CNP) fraud increased by 3.8 per cent. This means in 2020 alone, Australians have lost $418.9 million to CNP fraud and the number is expected to rise.
CNP fraud typically happens online, when a fraudster uses breached card information to make a distant purchase. The decline in face-to-face transactions since the start of the pandemic has caused CNP fraud to represent almost 90 per cent of all Australian card frauds.
The rapid growth of ecommerce in Australia comes with its own unique set of consequences as the number of scams directed at online shoppers are also on the rise. According to ScamWatch, the average number of shopping scams in Australia in 2021 increased by 40 per cent from 2020, with the number now sitting at 5,108 cases a month.
The APN also found that CNP fraud at Australian online businesses increased from 73 per cent in 2019 to 79 per cent in 2020. This means that businesses lost $265 million from CNP fraud alone in 2020. We have seen that online fraud impacts both consumers and businesses in the ecommerce industry. This means that retailers need to tread cautiously and take the necessary steps to secure the growing digital payments infrastructure.
Keeping on top of payment fraud in 2022
According to a report by credit reporting agency Equifax, businesses are looking to ramp up their investments in digital verification products in 2021, with 42% saying that they are doing so to improve the rate of completed customer transactions and 42% saying that they want to increase levels of trust among customers. Here are steps that businesses can take to navigate and minimise payment risk in 2022:
1. Understand shoppers’ behaviour
Who’s shopping with you? Businesses are best placed to utilise risk-based authentication tools that can identify serial friendly fraudsters. To reduce fraud, businesses need a holistic view of their customer behaviour from browsing habits to checkout. Behavioural analytics technology plays a key role in identifying fraud attempts at checkout. For instance, using AI-powered technology integrated in risk management tools links clustered transactions to identify a profile of a shopper even as they change devices, networks, and identities.
2. Utilise both human and machine learning capabilities
While fraud detection is perceived to be an automated process, a human component is still necessary to detect complex behaviour that does not conform to a pattern. A rules-based system is a perfect example of that. As a rule-based system, businesses retain full control and visibility over how risk decisions are made while still benefiting from machine learning-powered optimisation.
Risk management tools can be completely omnichannel, with the power to provide a single view of all shoppers and fraudsters, this ensures that businesses have maximum transparency and control over their risk management strategies.
3. Invest in tokenisation
CNP fraud can also be prevented through tokenisation. Tokenisation ensures customers’ card details are secure and protected as they are replaced with a unique digital information, otherwise known as a “token.” The creation of a token disables card information to be misused and allows businesses to securely store one or more payment details per shopper, which enables offerings of subscription payments, automatic top-ups to shopper accounts, and faster checkout experience.
When it comes to ecommerce fraud, attacks come in different shapes and sizes. What they have in common is skill and preparation, the better prepared you are and the faster you can react, the less risk you and your customers will face.
Courtesy- https://www.bit.com.au/guide/how-to-manage-payment-risks-and-fraud-in-2022-574765