{"id":1464,"date":"2022-10-20T13:01:15","date_gmt":"2022-10-20T03:01:15","guid":{"rendered":"https:\/\/blog.gpayments.com\/?p=1464"},"modified":"2023-05-23T17:35:14","modified_gmt":"2023-05-23T07:35:14","slug":"what-you-do-not-know-about-ecommerce-fraud-prevention","status":"publish","type":"post","link":"https:\/\/www.gpayments.com\/blog\/article\/what-you-do-not-know-about-ecommerce-fraud-prevention\/","title":{"rendered":"What You Do Not Know About Ecommerce Fraud Prevention"},"content":{"rendered":"

You probably know that every day billions of credit card transactions occur online. According to the Nilson Report, transactions on credit cards like Visa, Mastercard, UnionPay, American Express, Diners Club and JCB are expected to reach 800.41 billion in 2026<\/a> globally. <\/span>The region with the highest number of core credit card transactions is the Asia-Pacific, followed by Europe and the United States.<\/span><\/p>\n

The anticipated increase in credit card transactions is great news for online merchants and, unfortunately, even better news for ecommerce fraudsters, whose activity costs merchants billions every year in chargeback fees.<\/span><\/p>\n

The most costly online fraud \u2014 for now<\/b><\/span><\/h3>\n

Did you know that the most common form of ecommerce fraud is Card-Not-Present (CNP) fraud<\/a>? CNP fraud is of utmost concern for merchants and credit card issuers, because of the costs associated with suspected and actual fraud (chargebacks).<\/span><\/p>\n

This growing global problem of credit card fraud detection and prevention has spurred intercountry agreements \u2014 such as PSD2 \u2014 to protect consumers\u2019 privacy. Since merchants and issuers are responsible for verifying a card user\u2019s identity, technology partners have come up with fraud prevention solutions to reduce risks for consumers and merchants.<\/span><\/p>\n

If you are responsible for your company\u2019s fraud prevention, we want you to know what CNP fraud is and how to prevent it with 3DS2 solutions, like GPayments. Because what you don\u2019t know about fraudulent purchases should frighten you.<\/span><\/p>\n

What online merchants need to know about ecommerce fraud prevention<\/b><\/span><\/h2>\n

Ecommerce merchants ought to be aware of the increase in fraudulent activity. CNP fraud<\/a> may sound like someone has stolen your actual credit card, instead, this type of fraud uses stolen card details.<\/span><\/p>\n

Online fraud is growing<\/b><\/span><\/h3>\n

When a stolen credit card\u2019s information is used online, fraudsters do not have to contend with the high level of security embedded on an EMV chip. The information on the chip is only detected by an EMV reader, and these smart cards are impossible to duplicate. What contributes to the increase in e-commerce fraud? Large transaction volumes and their high value are too enticing for fraudsters.<\/span><\/p>\n

Shockingly, a fraudster can buy credit card information on the dark web<\/a> very affordably. According to Experian, a credit card number with its three-digit credit verification value (CVV) costs only $5 USD. Credit card information can also be obtained via hacking, phishing, malware or stealing credit card applications.<\/span><\/p>\n

There are other types of CNP fraud, such as refund fraud or friendly fraud, which involves a cardholder making a purchase and then reporting a fraudulent transaction to their credit card. Friendly fraud is hard to detect because it is committed by an authorised user. Nonetheless, CNP ecommerce fraud results in the merchant incurring costs like loss of inventory, paying the refund and a chargeback fee.<\/span><\/p>\n

The Federal Reserve Bank of Kansas City reported that merchants incurred 70-80%<\/b><\/a> of chargeback losses<\/b>. As online fraud grows, the share of that burden disproportionately lands on ecommerce merchants.<\/span><\/p>\n

Business impact of ecommerce fraud<\/b><\/span><\/h3>\n

No one likes the thought of being cheated, and transaction fraud brings a particular salt to the ecommerce merchant\u2019s wound, called the chargeback fee. It is estimated that these fees cost U.S. merchants $40 billion<\/a>. Consider the cost per fraudulent payment. An average online transaction is between $100 to $500.<\/span><\/p>\n

When an ecommerce merchant transacts with a fraudster, they will lose more than the cost of the item. Depending on an acquiring bank\u2019s rate, each refunded charge could cost between $20 to $100 for costs associated with covering a chargeback. Meaning, for every $100 transaction made with stolen information, the actual price is $240.<\/span><\/p>\n

The chargeback fee is a direct cost for repaying 100% of the charge to the issuing bank and the fees for handling the process. There are other risks and costs related to chargebacks:<\/span><\/p>\n