Did you know now is the best time to start protecting your business from fraud? If you don’t follow fraud news like we do, maybe not.
Now is a time where the risks associated with not implementing a fraud fighting strategy are extremely high. If you’re wondering why and what you can do about it, read on.
Now, before you start worrying too much, know that there is hope for fighting fraud. Although the word “fraud” tends to incite fear in the hearts of executives, losses can be reduced by putting controls in place that effectively counteract fraud.
Where We Are Now
Why is fraud prevention important at this very moment? Recent research shows fraud is making up a larger portion of total revenue compared to 2014. According to the Global Fraud Attack Index report, total fraud as a percentage of retail revenue increased 94% from 2014 to 2015. Total fraud attacks increased 163% in 2015.
During a three-quarter period in 2015, total fraud attacks climbed from 0.8% of transactions to 2.1% in the third quarter. This means that in just three quarters, the amount of fraudulent attacks nearly tripled!
In addition, this report found that attacks originating outside the United States are resulting in increasing transaction amounts measured in the same three-quarter period in 2015. Interestingly, attacks that originate from inside the U.S. are on the rise, but the transaction amounts are decreasing slightly. The transaction amounts from fraud originating outside the U.S. are nearly three times that of fraud originating inside.
Overall, these statistics paint a picture of the current battle businesses are up against. They show fraud is an increasing threat to the health of all businesses, regardless of size.
EMV Migration Means Pressing Risks
With the recent migration of EMV to the U.S., experts are warning “fraud will move online.” This can sound extremely doom and gloom if you haven’t given this issue attention, which is often the case for many businesses.
In fact, many businesses believe fraud is an unfortunate side-effect of business or costs too much to control. This puts these businesses, including many mobile commerce businesses, in a sticky situation when it comes to the expected increase in CNP fraud.
Fraud moves as opportunities change. If credit card fraud is more difficult to commit, fraudsters move on to the next option. In addition, the more people move to a certain channel, the more fraudsters will follow. Consumers are increasingly flocking to mobile and online channels to complete transactions.
The full effect of EMV migration on card-not-present (CNP) fraud hasn’t been completely felt yet and won’t be for a few years. This doesn’t mean businesses should wait to implement strategies. Protecting your business for an increase in fraud in the future means starting now.
CNP fraud is expected to grow 100% by 2018. This number is determined by the historical increase in fraud after countries implement EMV. Historically, this increase has been as high as 360% (France). All businesses are affected by this increase in fraud, but as we recently discussed, small businesses are particularly vulnerable to fraud.
Digital Goods & Luxury Goods Targeted
Fraudsters like to go after certain types of merchants. When you think of what fraudsters are after, your first guess might be electronics. You’d be wrong. In fact, fraud attacks on the electronic industry actually went down 3% in 2015.
If you’re in the business of selling digital goods, now is definitely the time to invest in securing against fraud. Digital goods are increasingly targeted by fraudsters. In 2015, fraud attacks on digital goods businesses increased 254%. This is compared to a 163% increase overall among all merchants.
This reflects the increasing trend of fraudsters moving to online in an effort to avoid being detected. The increased targeting of digital goods will likely continue to increase as more companies go digital.
The second highest increase was seen in luxury goods businesses (108%). Luxury goods businesses are lose a lot more per attack, an average of $1,000 in every fraud attack compared to around $100 for other segments like digital goods. The fact that the number of attacks are increasing drastically is bad news for this merchant segment.
For digital goods and luxury jewelry businesses, investing in fraud prevention is an absolute necessity. You can be sure if your business is in this industry, you’ll likely deal with the consequences of fraud.
In addition to targeting digital and luxury goods, there are a variety of other trends fraudsters follow. For example, fraudsters are more likely to have a billing address in the Southern or Western regions of the United States. Orders shipped to Delaware, Florida, and Georgia are more likely to be fraudulent. States with high robbery rates and unemployment rates are associated with higher rates of online fraud. In addition, fraudsters are more likely to create online accounts, commit the crime, and move on. These clues from current trends can aid in fraud detection.
How do fraudsters tend to commit fraud? The PYMNTS/Forter report shows “suspected botnets” are by far the largest source of attacks. Botnets involve technology that can identify vulnerabilities in a system and swiftly attack. These attacks are most often targeted at digital goods. In fact, 75% of fraud losses are from botnet attacks on digital goods merchants.
Trends like these can be incredibly important when trying to determine if fraud is likely to be more prevalent in your business. The more data available to reveal fraudster’s to the world, the more likely solutions can be designed to expose them.
What Businesses Can Do
How should we react to the increasing threat of fraud or to the specific targets of fraudsters? First, don’t panic! There is still time to implement defenses.
Although managing fraud threats can sound like a huge endeavor, breaking it down step by step will help you create a strategy that works for your business. Here are some important steps to consider:
- Review your business’ overall fraud strategy
First, consider where your business stands in terms of fraud at this moment. Do you have a fraud prevention strategy in place? Does this strategy work? Make sure you evaluate current strategies using all important measures. Also, make sure you regularly evaluate these measures to see if your strategy can adapt to changes in the fraud landscape. Fraudsters are always moving around and they won’t wait for businesses to catch up.
- Implement effective fraud-fighting technology
Check out effective solutions like behavioral biometrics to protect against fraudsters. New solutions like mobile behavioral biometrics are able to decrease fraud while keeping friction low. When used to detect fraud, they can also reduce false positives. Up to 25% of declined sales by eCommerce merchants were false positives. That’s a huge loss of potential revenue.
With the recent credit card EMV migration and fraud attack increases looming overhead, now is the best time to invest in affordable and effective solutions like mobile behavioral biometrics that work without negatively affecting user experience. These solutions are able to prevent fraudsters who are flocking to newer channels like mobile and will be key to fighting the ever-adapting face of fraud.