Online Fraud is Growing. What Can Your Business Do?
What is one of the biggest growth industries in the United States today? Hint: It isn’t something most of you would want your kids to major in at school, unless you want them to go to the state pen instead of Penn State – because this rapidly growing industry is online fraud.
The costs of eCommerce fraud are staggering
Estimates vary, but recent figures from DigitalCommerce360 project the value of eCommerce fraud nearly doubling from US $10 billion to $19 billion between 2014 and 2018, as the eCommerce market continues to grow from a historic peak of US $2.3 trillion in 2017. One particular area of fraud, account takeovers, jumped 45% in Q2 of 2017 alone according to the Global Fraud Index, and these fraudulent pirated accounts represent one of the top three types of online retail fraud.
A subtle but equally important issue is what the fear of online fraud costs you and your business. According to a recent fraud benchmarking survey from CyberSource:
- Domestic and cross-border orders have exactly the same rates of fraud among companies surveyed – just under 1% – however nearly twice as many cross-border orders get rejected, costing valuable revenue as well as damaging customer relationships.
- The costs of manual transaction review are one of the major financial consequences of online fraud. Nearly 80% of companies conduct manual reviews, impacting an average 25% of their transactions – and yet nearly 90% of these transactions are ultimately accepted.
- The costs of manual review hits smaller companies particularly hard, where companies under US $5M in annual revenue review nearly six times the percentage of transactions (47%) as companies greater than $100M (8%).
The uptake of all of this? Guarding against eCommerce fraud is really a two-pronged effort: reducing online fraud itself, and reducing the revenue lost to the indirect costs of fraud. For both of these issues, the key is implementing effective automated solutions.
Technology plays a key role in preventing online fraud
According to the CyberSource survey, companies themselves rate three technologies among their top weapons against fraud:
Address verification: making sure an address is real, valid, and corresponds with the person making the order
Credit card number verification: making sure a credit card is legitimate and properly owned
Fraud scoring models: coming up with a quantitative score based on multifactor analysis
Other tools fall into the category of leveraging existing customer data, such as credit history checks, customer order history, or two-factor phone authentication using previous device information on file.
Cyber-fraud is growing explosively nowadays because the market for it gets more lucrative every year, and combating it requires tools that keep you one step ahead of the fraudsters. Service Objects’ fraud prevention capabilities have the advantage of leveraging authoritative up-to-the-minute third-party data, such as USPS CASS Certified® address validation capabilities, global address validation that verifies and corrects international mailing addresses to the unique requirements of each country’s postal address formats and cultural idiosyncrasies, and IP validation that helps you ensure that the origin of an online order correlates with billing and shipping locations. In addition, we offer lead and order validation capabilities using multi-function verifications that give you a quantitative quality score you can use to automate your order processing decisions.
We offer a free consultation to help you determine what tools can help protect your revenue stream. Contact us today to learn what we can do for you.