E-commerce Fraud: The Dark Cloud Over Online Transactions

Ecommerce continues to grow each year. Unfortunately, as online shopping grows more popular, fraud escalates right along with it. Citing data from eMarketer, Internet Retailer noted by 2019, ecommerce sales will reach $3.5 trillion, with online sales accounting for 12.4 percent of global retail sales in the same timeframe.

The fraud issue

Meanwhile, fraudsters also attack digital channels, leading to escalating losses from fraud. LexisNexis found larger merchants lost 1.39 percent of revenue to fraud in 2015, up from 0.85 percent the previous year. That meant merchants faced an average of 333 attempted fraudulent transactions each month, only 177 of which were prevented.

Fighting back

It’s crucial that merchants fight back. Most online stores have begun to use a number of strategies, including two-factor authentication, IP-based geolocation or address verification, tokenization and more to prevent fraudulent transactions from going through.

Unfortunately, many ecommerce businesses still review orders manually to check for red flags – a process that takes lots of time and resources. According to CyberSource, 81 percent of merchants still perform manual reviews. Overall, merchants manually review 27 percent of all orders, taking an average of 5 minutes to look over each one.

Machine learning

Luckily, there are better ways to combat fraud. Not only does analyzing transactions manually take time and money, it’s also less effective than automated fraud management tools. Fraud management tools powered by machine learning can learn and evolve over time, giving them an edge over manual reviewers. Fraud threats can change quickly, and the existing methods aren’t always able to keep up with evolutions in criminal activity online.

Check out our infographic to learn more about ecommerce fraud and how companies manage this issue.

Ken Bui
Ken Bui

Latest posts by Ken Bui (see all)