COVID-19 and worldwide lockdowns have severely impacted online buyer behavior. Similarly, eCommerce fraudsters, too, have switched up their game and found new ways of targeting vulnerable businesses.
Millions of new customers have opened accounts on eCommerce platforms to deal with the lockdowns. The increase in new customers is great news for eCommerce businesses. But, orders from new accounts also increase the risks of fraud. Merchants using outdated fraud prevention software can easily suffer from high false decline rates. These outdated fraud prevention tools do not have enough data to differentiate between genuine consumers and frauds.
The elderly population is getting involved in eCommerce for the first time. Many of them are avoiding visiting stores as they’re under self-imposed quarantine. Such inexperienced online shoppers will need additional security protection.
In the first week of this year’s holiday shopping season, American eCommerce shoppers splurged $21.7 billion in purchases. That’s a 21% increase since last year. Health concerns related to the pandemic is forcing people to stay indoors, even during the holiday season.
This increase in online transactions is lulling many eCommerce vendors into a false sense of security. Many of them assume that the increase in sales and revenue will make up for losses stemming from fraud attacks. An increase in frauds like account takeover or returns abuse fraud can lead to record-breaking losses for unprepared vendors.
For eCommerce platforms, an increase in web traffic almost always comes with added fraud risks. Monetary loss isn’t even the primary concern for most vendors. For many vendors, their reputation is at stake. If a fraudster can manipulate an eCommerce platform to compromise customer accounts, the merchant’s ability to generate revenue for the rest of the year will be severely damaged.
Many vendors weren’t sure about implementing the latest and the most-advanced eCommerce fraud prevention software. But, the fraud risks that have accompanied the pandemic could push these vendors towards implementing these advanced tools. Here’s why it’s so important to use the best fraud prevention software in 2020 –
Fraud will Hurt eCommerce Vendors More Than Ever.
In 2020, every $1 of lost revenue due to fraud will cost sellers $3.36. That’s because fraud attempts hinder a seller’s reputation and ability to attract new customers. Since the number of attempted fraud attacks is higher than ever, the cost of every successful fraud attack has increased.
In the US, online vendors are experiencing 344 fraud attempts every month (it was 277/month in 2019)
On average, 118 of these monthly fraud attempts are prevented (34.3%). The total monthly fraud preventions in 2019 were 156/month (56.3%).
That’s why the average cost of fraudulent transactions has increased by 7.3% in 2020. From $3.13 in 2019 to $3.36 in 2020.
Mid to large online merchants who specialize in selling physical goods are set to suffer the most because of returns abuse and chargeback fraud.
The Number of Attempted Frauds Will Keep Increasing
Every year, the number of fraud attempts on eCommerce platforms increases. The rise of online shopping and increased economic pressures in 2020 almost guarantees a heavy increase in fraud attempts.
The increase in fraud attempts is mainly down to these factors –
More people are feeling compelled to commit fraud to address their financial challenges in this uncertain economic climate.
Many eCommerce platforms are failing to deal with the unprecedented increase in orders. With little to no fraud-prevention tools, fraudsters find it easier to penetrate these websites and steal unprotected customer data.
The uncertainty surrounding the pandemic is giving fraudsters a sense of justification. According to many of them, eCommerce sellers are doing very well despite the pandemic. So, stealing from these high-performing vendors is a justifiable action, according to many of these scammers.
Vendors need to understand their enemies’ psychology and consider these factors when creating a plan to deal with these threats.
Economic Uncertainty Calls Unique Security Measures
An increase in crime during periods of economic uncertainty is very common. Retailers have had to adjust to numerous wide-scale economic crises in history. They’ve had to adapt a completely new outlook to fraud and crime during these periods. Some helpful practices that can help modern-day online vendors include –
Using Encryption Software – Encryption software stores incomplete customer data. Fraudsters attempting to steal customer information will find these incomplete data sets completely useless.
Employee Restrictions – The unanticipated transition from safe office spaces to lax home office systems has left many employees vulnerable to fraud. For instance, employees of the World Health Organization (WHO) were recently targeted by hackers. The problem with data breaches is that a single employee’s mistake can ruin the company’s reputation. Hence, companies must restrict the amount of business data accessible to each employee.
2FA – Online vendors must offer their shoppers two-factor authentication (2FA) processes that don’t involve SMS messages. Instead, using authenticator apps or private email is much safer.
Today’s online sellers have to do the same and adapt their security measures to meet the unique challenges triggered by the global pandemic.