Juniper, in its Online Payment Fraud 2020 2025 Summary, estimated that the global eCommerce fraud volumes were in the vicinity of $20 billion, with North America accounting for almost 45 to 50% of that [1]. And the UK-based digital research agency goes on to predict in a press note that the annual losses in the e-commerce industry are likely to touch $206 billion for the 5-year period 2021 to 2025 [2], making an average of $40 billion losses a year going forward. The figures are staggering to say the least.
A look at frauds in the banking industry will also make shocking reading. Banking fraud grew by over 159% in 2021 compared to 2020. Online frauds accounted for 33% of bank fraud costs and as much as 83% of online frauds related to card frauds [3]. Yet what’s more alarming was that 62% of the companies reported that they learnt of the frauds only after their customers notified them!
The bottom line is clear – Online Fraud Detection (OFD) is, and has been for a while now, the need of the hour.
The verdict is in
While there is certainly no dearth of information on the techniques used by fraudsters, thought leaders in the fraud detection space are calling for a mindset change to online fraud and business objectives. Forter in its article summarizing the Gartner Market Guide for Online Fraud Detection [4] stated unequivocally that ‘Online Fraud Detection can no longer be looked at in a silo or as a point solution, but should be viewed as a strategic commerce enabler. This will happen at the merchant, platform and payment levels’
A broader approach to the problem of online fraud is needed. If they are to continue growing, organizations are called upon to look at a single goal – combining fraud identification and earnings from business – rather than as independent or separate goals like in earlier times. And they must do this while providing customers with the best possible online experience.
OFD touchpoints
Gartner in its 2019 Market Guide for Online Fraud Detection [5] lays down the 5 touchpoints for businesses looking to implement fraud detection systems while driving growth.
- In a perpetually evolving fraud landscape where fraudsters are changing tactics at a rapid pace, fraud companies need to ensure their systems are equipped to holistically address the new challenges proactively. ‘One-size fits all’ solutions are no longer going to be effective
- Fraud companies will be called upon to move from rule-based threat detection to machine-based threat detection.
- Separate data and decision silos, a situation that is fodder for the fraudster, will need to be merged so as to optimally effect online detection of frauds
- With multiple attack points like the internet, mobile applications and phones, a unified fraud detection strategy will be needed to comprehensively address all data points.
- OFD systems must look at the entire user journey, right from the time they arrive on the digital platform. As the report says “This includes assessing behavior, evaluating the likelihood of bots or scripts being used, monitoring account login or creation, and defining the risk of the action being carried out.”
A holistic approach to an OFD system
With cashless modes of payment becoming the norm in most countries, online payments are predicted to keep increasing. So too will portals, platforms and payment gateways. Keeping pace with them will be fraudsters and fraud techniques. With online frauds, having already experienced the havoc caused by bots and identity theft, strong OFD systems will call for an ensemble of AI-driven tools including those for bot-detecting, key tracking, and identity management using telemetry and leveraging of a constantly-increasing user database.
Happily, the projections indicate the mindset towards OFD is already changing. Juniper Research pegs the spend on Online Fraud Detection globally for 2022 to be $9.3 billion [6], up by 22% from original estimates for the year. It goes on to state that the Latin American, Indian sub-continent and the MENA regions would experience increased online fraud, a worrisome point as these markets account for a mere 4% of the OFD spends.
But with increased consciousness and a serious approach, it is worthwhile revisiting the benefits of a robust OFD system – minimal false declines, satisfactory online user experience and long-term customer buy in, all leading to larger and more sustainable revenues.
With its suite of cybersecurity professional services and solutions, which include multi-factor authentication, pre-emptive malware detection, endpoint security systems and centralized data encryption to name just a few, Aurora can be of assistance in the ongoing war against Online Fraud.
For a more in-depth review of our award-winning products and to speak to us, visit this link:
Security Professional Services | Aurora (aurorait.com)
or reach us at sales@aurorait.com or call +1 888 282 0696
Sources:
[1] Juniper Research: Online Payment Fraud Statistics: Market Summary | Infographics (juniperresearch.com)
[2] Juniper Research: Online Payment Fraud Losses to Exceed $206 Billion Over the Next Five Years (juniperresearch.com)
[3] Entrepreneurship facts article: Online Payment Fraud Statistics: Market Summary | Infographics (juniperresearch.com)
[4] Forter: 3 Key Points in the Gartner Market Guide for Online Fraud Detection – Forter
[5] Gartner: 2019 Gartner Market Guide for Online Fraud Detection – 5 key takeaways for fraud fighters – Sift Blog
[6] Juniper Research: Juniper Research: Online payment fraud detection spend to reach $9.3 billion by 2022 | IoT Now News & Reports (iot-now.com)
