In the context of the corona pandemic, e-commerce, which was already flourishing, has experienced an unprecedented boom. The reasons for staying at home and shopping online were varied, especially in the early days, and ranged from weeks of store closures to the risk of infection that still exists today when shopping locally. It is therefore not surprising that even those who had never ordered from an online shop before suddenly even shifted their weekly shopping to the Internet. It is estimated that this massive growth will mean that global online retail sales will surpass $7 trillion for the first time by 2025.
That’s the good news. However, there is also a downside that comes directly with the tremendous success of e-commerce. Because where money flows in large quantities, there are always scammers who want to benefit as well. Retailers worldwide are exposed to well over 200,000 cyber attacks – every month. As a result, fraud-related lost sales rose to over $20 billion in 2021. Compared to the previous year, this corresponds to an increase of 18 percent. And the trend is only increasing, as experts predict that e-commerce will lose 25 billion US dollars annually due to fraudulent orders by 2024, despite the introduction of Secure Customer Authentication (SCA). In order to adequately prepare for this increasing threat and to protect customers from fraud attempts, retailers must take action now.
Early detection and prevention
The key to preventing ecommerce fraud isn’t just detecting suspicious activity as it’s happening. It is also about taking preventive measures to minimize the risk of fraud beforehand. Traditional legacy solutions simply don’t meet the demands of today’s e-commerce. They are too imprecise and too slow to sound the alarm in time. Therefore, merchants should rely on the implementation of an adaptable end-to-end fraud prevention solution. This raises the security of your shop to a new level and can also offer customers the trust that should not be compromised despite the increased dangers.
Always up to date
Legacy solutions that e-commerce retailers run in-house are not only too slow and inaccurate – they also need to be kept up to date as new trends and scams emerge all the time. If this does not happen, retailers are not only putting their customers at great risk, but also themselves. Instead, it makes more sense to rely on external solutions. Since vendors keep themselves updated on a daily basis, they know best what security measures are needed, so merchants can delegate this responsibility, which not only reduces lost sales, but also saves a lot of time.
Use of artificial intelligence
Security isn’t the only thing that matters when shopping online. Potential buyers also want a convenient ordering and payment process. If they don’t run smoothly, they will probably abandon their purchase and move on to the competition. In order to be able to release orders within the shortest possible time, there is no way around fully automatic solutions for retailers. The manual check would simply take too long – time that hardly anyone can spare in the fast pace of today’s e-commerce. But this is exactly where solutions based on artificial intelligence come into play. They are able to evaluate large amounts of data within a very short time and can thus decide almost in real time whether it is a legitimate order or an attempt at fraud.
More security has its price
Enforcing Secure Customer Authentication (SCA) can significantly reduce fraudulent activity and even shift fraud liability from the merchant to the credit institution, giving merchants a huge advantage in theory. However, although SCA protocols such as 3-D Secure make it difficult for fraudsters to infiltrate legitimate customers’ accounts, even these new solutions do not offer guaranteed protection against online fraud. They also create new points of friction – for example because the company that issued the credit or debit card also checks the identity of the customer with a password or a code sent by SMS. In case of doubt, however, this means a less positive shopping experience for them, which could once again affect loyalty.
Large data networks for more accuracy
As shops upgrade and new regulations are added to protect customers, online scammers are also busy adapting their methods. Therefore, a single perspective is not enough to fully monitor and prevent potential fraud attempts. Instead, using a robust data network is crucial. Only when a shop is able to link billions of digital interactions worldwide can fine nuances be recognized and legitimate orders distinguished from fraudulent ones. As a rule of thumb, the more data e-commerce retailers have, the faster and more accurately they can detect and prevent fraud.
