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E-retail driving online fraud loss

Sibahle Malinga
By Sibahle Malinga
Johannesburg, 04 May 2016
E-retail tops the list of online fraud with overall incidents estimated to reach $16.6 billion by 2020.
E-retail tops the list of online fraud with overall incidents estimated to reach $16.6 billion by 2020.

The value of online fraudulent transactions is expected to reach $25.6 billion globally by 2020, up from $10.7 billion last year. This means that by the end of the decade, $4 out of every online payment of $1 000 will be fraudulent.

This is according to a new study from Juniper Research titled : "Online Payment Fraud: Key Vertical Strategies & Management 2016-2020", which found e-retail tops the list of online fraud with 65% of overall incidents estimated to reach $16.6 billion by 2020. Second on the list is online banking fraud, making up 27% of cases globally which are valued at $6.9 billion. Airline ticketing fraud ranks in at third place with 6% of incidents making up $1.5 billion.

Growth in e-commerce, increased use of mobile payments and increasing flows of money transacted via different online channels are among the significant factors driving fraud in e-commerce and online banking, says Juniper.

The report further found the implementation of CHIP and PIN services at POS (point of sale) locations in the US is likely to be a key factor driving activity in the online fraud space. It argued that the greater security afforded by CHIP and PIN persuades fraudsters to switch their attention from the in-store environment to the card not present (CNP) space.

According to mobile payments Web site, mobilepaymentstoday.com, the US's rollout of Europay, MasterCard, and Visa (EMV) technology is beginning to eliminate some fraud concerns of retailers.

Experts expect to see an increase in online fraud as fraudsters turn their attention to online sales. Some reports indicate online retail fraud in the US alone is expected to rise by 106% over the next three years, says the site.

Two weeks ago the South African Bank Risk Information Centre (Sabric) warned bank customers to pay more attention to their mobile security.

Sabric CEO Kalyani Pillay said while banks continuously provide cyber security messages and advice, criminals are also devising new ways to steal from customers.

"With the increase of cyber crime worldwide, the issue of cyber security has moved from the server room to the board room in many local businesses, and the banking sector is no different," he pointed out.

Pillay noted while new technologies such as apps and WiFi spots have made banking easily accessible to the public, they also carry certain risks and consumers must be aware of these risks and take steps to safeguard themselves.

Juniper also claims e-retail would be particularly susceptible to online fraud in the next few years, with the value of fraud in this sector increasing at twice that of banking and seven times that of airline ticketing.

The research highlighted two key areas for fraud within e-retail namely; "buy-online, pay in-store' methods and electronic gift cards.

The report argued that the continuing migration to online and mobile shopping, of both digital and physical goods, will provide a further incentive for fraudsters to focus their attention on these channels.

Meanwhile, Juniper claims that although banks are able to counter online banking fraud by deploying new technologies such as 3D-Secure and device fingerprinting , these measures often only provide temporary respite as fraudsters quickly find new ways to defraud.

According to a report by Javelin Strategy & Research, card not present fraud, which includes online transactions, is expected to be nearly four times greater than point- of- sale card fraud by 2018.

The study says consumer choices can negatively impact fraud detection efforts made by banks as consumers who do not trust their financial institutions and do not take advantage of the services offered by them are setting the stage for more damage if they become fraud victims.

"These consumers are less likely to use transaction monitoring, e-mail alerts, credit freezes and black market monitoring.

"This results in their information being used for 75% longer by fraudsters and incurring a 185% greater mean consumer expense than those victims that have high trust in their financial institutions," revealed the report.

The increasing threat, of online fraud, says Juniper, has led to the emergence of a host of new tech start-ups developing innovative technology to combat the problem.