by AUFA MARDHIAH / pic MUHD AMIN NAHARUL
IT HAS been hard for businesses to fight against e-commerce fraud, especially when e-commerce took precedence during the Covid-19 pandemic.
According to a survey by Stripe Inc, this is because frauds have become more complex (56%), there have been much more frauds compared to pre-pandemic times (41%) and perpetrators have become more sophisticated.
Stripe said as more shoppers shop online, the volume of fraud payments has increased and it is hard to manually review all transactions.
The report, which was conducted on 2,500 business leaders in Australia, Canada, France, Germany, Japan, the Netherlands, Singapore, the UK and the US, highlighted that the biggest fraud trends during the period are product-related disputes and card-testing attacks.
This year, product related disputes doubled as compared to 2019 with 156% temporary surge involving “product not received” and “product not acceptable”.
When sellers take weeks or months to fulfil orders due to supply chain disruptions, customers tend to request for chargebacks.
Meanwhile, 40% of businesses experienced attempted card testing attacks in 2019. This occurs when fraudsters try to find out whether stolen card information is active to make purchases.
“The negative impact of card testing attacks include an influx of transactions, leading to higher payment processing costs and the risk of downtime. It also damages the global financial ecosystem.
“From this, businesses may be penalised by issuers and card networks for allowing card testing attacks,” the report said.
In a separate analysis, charities were found to be more prone to card testing attacks (11%) due to having smaller teams that lack the resources to block transactions.
The report stated that in Asia Pacific, Singapore experienced half the fraud rate.
“From the regional point of view, the variation in fraud across countries can make it even more difficult for global businesses to fight fraud.
“As a result, there is never a one-size-fits-all approach to fraud management,” Stripe said.
On the company size and business model, business leaders with large fraud teams are more likely to report higher fraud losses.
Percentage-wise, enterprises (80%) expect to put more resources behind fraud prevention this year, followed by scaleups (73%) and start-ups (69%).
On the same note, 59% of the survey’s respondents expect their businesses to lose more revenue to fraud this year compared to last year.
The survey found out that the business impact of fraud goes beyond just financial losses, where 72% of global business leaders had to divert product or engineering resources to fight fraud and 58% of global business leaders had to delay expansion or investment plans due to fraud.
According to the study, the impact of fraud towards business includes lower payment conversion rates; the more fraud a business tries to prevent, the more likely they are to block legitimate charges as well.
This causes businesses to take both a gross profit and reputational hit (33% of consumers refuse to shop again at a business after a false decline).
A fraud professional at a software-as-a-service company in Canada said even a single fraud issue can cause a lot of trouble and potentially makes them miss a legitimate buyer due to additional security reviews.
“We also experience operational overhead that is labour intensive. Businesses need a team of fraud analysts to assess risk based on a variety of factors, such as transaction details and customer history.
“It is really frustrating because it means that we have to divert resources to accommodate it or else we feel that the situation will get out of hand,” he said in the survey.
The situation proves that larger companies are more likely to adopt manual reviews, but the larger they are, the smaller the fraction of transactions they review.
“In a way, large businesses have the resources to manually review transactions, but they save those manual reviews for higher-stake transactions.
“Based on the report, we predicted a few outcomes for the fraud industry. Richer sources of data will help businesses make faster and more accurate decisions; issuers and businesses will collaborate more to streamline disputes and reduce false declines; and consumer payment will continue to shift, thus changing the fraud industry,” said Stripe.