Retailers and consumers must brace themselves for higher levels of eCommerce fraud during the upcoming Christmas shopping season, according to new benchmark data from ACI Worldwide (NASDAQ: ACIW), a global provider of payments and fraud prevention solutions. The data, based on hundreds of millions of transactions from large global retailers operating in Europe and the US,* reveals a significant increase in attempted fraudulent transactions as well as new types of fraud.
Key findings of the research:
- 2015 saw a significant increase in card-not-present (CNP) fraud attempts; 1 out of 86 transactions was a fraudulent attempt vs 1 out of 114 transactions in 2014
- This means fraud attempt rates by volume have increased by 30 percent compared to the previous year as consumers shop with more devices online
- Fraud attempt rates by value have increased by 33 percent
Jackie Barwell, Director, Fraud Product Management, ACI Worldwide:
“When it comes to online fraud, Christmas 2015 is likely to be among the riskiest seasons retailers have ever seen; it is therefore critical that they prepare for a significant uptick in fraud, particularly within eCommerce channels.
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“The shift to more secure EMV chip cards in the US is one of the key factors contributing to an increase in online fraud attempts globally. Retailers have been busy tightening controls on card present transactions, and fraudsters are increasingly looking at eCommerce channels instead, for their fraudulent attempts.”
“Consumers need to be more vigilant than ever during this holiday shopping season. No one is immune to fraudulent attacks as some of the high profile data breaches in recent weeks have shown. Stealing and reselling data from ordinary consumers is now a highly organised criminal activity and fraudsters have been finding ever more sophisticated ways to hack databases or obtain data from individual consumers via social engineering and phishing activities.
New paths to fraud
The past year has also revealed new paths to fraud, due to the increase in omni-channel shopping options. The data reveals that digital downloads (virtual gift cards or eGifting) have the highest attempted fraud rate at 9.55 percent, followed by online purchase with next day/overnight delivery at 6.57 percent. Fraud rate attempts for international online orders stood at 2.38 percent, and buy online/pickup in store 2.15 percent.
Buy online/pick up in-store attempted fraud rates are expected to increase by 28% this holiday season (partly as a result of EMV being deployed within the card-present environment). Some retailers do not require consumers to re-run cards when they pick up products in store, making this an attractive option for fraudsters.
Jackie Barwell adds:
“Our findings suggest that merchants must be even more vigilant and shore up eCommerce fraud protocols. We can’t overstate the benefit of a targeted risk strategy based on peak holiday periods to ensure maximum revenue while also minimizing false positives. It is also critical for retailers to implement a real-time fraud solution, which continuously monitors fraud behaviour and trends across all channels, both online and in-store.”
The research analyses payment transaction data from a sampling of leading U.S. and European retailers using the ACI ReD Shield fraud prevention service between January and July 2015, compared against the same period in 2014.
Volume is the number of transactions, comparing last year to this year, at like for like global retail customers
Value is the value of transactions, comparing last year to this year, at like for like global retail customers
Fraud Attempt Rate: a transaction associated to any one or more of the following:
- data point confirmed fraud as a result of a merchant verifying
- data point matched a record in ReD Shield global screening negative database
- Chargebacks, Credit Card Numbers being sold online in underground chat channels, or reported as fraud by an Issuer
- pattern matching a recent confirmed fraud behaviour