Fraud is often considered as a ” bad word ” that should be rejected out of hand, believing that the company has all the firewalls, internal controls and security devices possible. If the subject can sometimes be perceived as anxiety-inducing, it is not because we fear it that we get rid of it…simply by ignoring it.
State of payment fraud – Trends and insights
Many fraudsters took advantage of the COVID-19 pandemic in 2020
The pandemic has played a key role in the evolution and scale of payment fraud in 2020. In addition, the ongoing disruption in the e-commerce industry has also highlighted the strength of the fraud economy and the danger it represents to businesses. More than a generic term for online crime, it is a sophisticated network of active cybercriminals with access to everything they need to exploit online businesses and operates on the same basic principles as the industries it affects.
Consequently, fraudsters are as familiar with the mechanics of digital commerce as the merchants they target. They can accurately identify security holes and know how to use a merchant’s success against them. Last year, Internet traffic increased by 50-70%, and online shopper expenses nearly doubled. Fraudsters took advantage of the increased transaction volume and unanticipated consumer behaviors to increase the average value of fraudulent purchases.
Fraud attacks doubled in 2020 as COVID-19 transforms the digital economy
Source: Arkose Labs
Fraud Rates by Industry
- Online gaming: This industry is still a prime target, with 65 attacks reported every second. The second quarter saw a shift toward human-caused attacks (41%), and the most attacked touchpoint was logins, which saw a 22% increase in attack volume compared to the previous quarter. In-game abuse attacks, such as real money trading, are also on the rise, with 58 million in-game abuse attacks detected in the first half of 2020.
- Finance and fintech: Attack levels on financial institutions rose notably in Q2 2020, after an initial dip in April 2020. These attacks were primarily human-driven and focused on application fraud.
- Retail and travel: Businesses that have recently incorporated e-commerce in response to COVID-19 are particularly vulnerable to fraud. In Q2, one in five attacks were human-driven, and these largely targeted e-commerce sites due to low traffic volumes in the travel sector.
- Technology: Due to continued remote work, education, and socialization, the technology sector saw an increase in targeted attacks. In the second quarter, human attacks dominated (57%), and mobile attacks also increased, with 27% targeting mobile traffic.
Source: The Paypers
Three steps to combat fraud
- Take a proactive approach to fraud prevention
To improve fraud prevention, you need to focus on three actions. First, identify, classify and address all your risks. Second, reinforce your anti-fraud technology with proper governance, expertise and monitoring. Finally, be aware of fraud when it happens.
- Don’t tolerate fraud
When your organization is hit by fraud, how do you react? Nearly half of companies say they have not investigated. But of those that did, 60% were better off afterward. The disruption caused by fraud can act as a positive turning point—a trigger for an organizational transformation that reinforces the organization’s protections and responses for the coming copy.
- Call in an expert
Several solutions can help minimize the risk of fraud and chargeback fraud, such as implementing 3D Secure, fraud detection monitoring, address verification services, credit card verification code validation, and beyond. Nexway, as Merchant of Record, already has all of these solutions in place to help you run a more prosperous, efficient, and profitable e-commerce business.
Handling Chargebacks and Fraud solution
According to Victor Iezuitov – Nexway’s CEO, not every chargeback request is a fraudulent one. Of course, they are necessary, especially in a digital world where fraudulent activity is becoming more common.
There are ways to fight chargeback culture, hold onto your profits and keep customers happy at the same time. Taking away the faceless nature of your online activities can also reduce chargeback requests. Creating an online customer service policy through avenues such as social media channels can again go a long way to improving customer satisfaction and reducing chargeback rates.
Gaming INDUSTRY and Chargeback Fraud
As mentioned previously, gaming platforms are increasingly attracting fraudsters. Why? Because they store many payment receipts, allow relative anonymity, and are not subject to regulatory requirements and KYC (Know Your Customer) checks.
Some of the most common chargeback requests those in the gaming industry face are:
- Lost or stolen cards: Online payments make purchasing easier than ever, but unless the system is up to date and suitable fraud protection checks are in place, people can issue a chargeback request for lost or stolen credit cards (rightly or wrongly)
- No real return policies: Because developers and online gaming operators are not dealing with a physical product, they are often lax on their own return policies and can neglect customer service issues, resulting in a chargeback request.
- Returns and Cancelled Transactions: These are, more often than not, the most legitimate chargebacks, either stemming from a customer being unhappy with a product purchased or having a second thought after initiating a purchase.
- Affiliate Fraud: This happens when savvy affiliate marketers allow many fraudulent transactions to occur on their sites to boost their own commissions. Typically, they will cash out on those commissions before a retailer ever catches on.
- Authorization and Processing Issues: These are errors that happen on your payment processor’s side of things – primarily when the processor can not authorize a transaction – and can be avoided with the right systems and solutions in place to minimize error.
Trust in Nexway
What is your organization doing to protect itself from fraudulent activity? Start securing your payments today! Take the necessary steps to reduce financial losses, preserve customer and brand reputation while maintaining the organization’s efficiency. Focus on your core business and offload the responsibilities of payments, collections, compliance, and fraud.
Don’t try to fight fraud alone. Let Nexway help you.Contact us today to learn more.