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Online Payment Fraud to Reach New Levels

By Greg Tavarez July 12, 2022

Everyone who owns an email address has seen it — an email that looks like it was sent from a bank or other vendor claiming the recipient's email has been compromised and they have to change their password. Without checking the email and taking the precautions to make sure it is legit, the recipient does as the email asks, and their account is stolen by the fraudster, who will likely use it to purchase good goods or sell personal financial information.

Losses across the sales of digital goods, physical goods, money transfer transactions and banking, as well as purchases like airline tickets are examples of online payment fraud. Fraud attacks can also include business email compromise and socially engineered fraud.

Cumulative merchant losses to online payment fraud globally are expected to exceed $343 billion between 2023-27, according to a new study by Juniper Research. To put it into perspective, this is equivalent to 350% of Apple’s reported net income in the 2021 fiscal year.

Even with identity verification measures being more widely adopted, online payment fraud is being driven by the bad actors adapting in areas such as account takeover fraud. This is when a user’s account is hijacked, like in the bank example previously used.

Physical goods purchases will account for almost half of online payment fraud losses globally over the next five years, growing by 110%. Physical goods are a main target for the bad actors because of the resale potential.

But, how does one prevent online payment fraud? Because account takeover is the top factor driving the fraud, vendors need to continue to orchestrate the right mix of verification tools at the most effective point in the customer journey, even in developing markets which are major risks of attacks on physical goods because of relaxed verification processes.

“Payment fraud detection and prevention vendors must build a multitude of verification capabilities, and intelligently orchestrate different solutions depending on circumstances, in order to correctly protect both merchants and users,” said report author Nick Maynard.

Multiple sources of address verification and multi-factor authentication to reduce fraudulent incidents for physical merchants will be key in the next few years to help fight the continued increase in fraud and the bad actors.

Edited by Erik Linask

CustomerZone360 Editor

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