Card-not-present Fraud Increases as Consumers Move Online and Mobile
December 19, 2017
One of the biggest fraud warnings in the US and around the world for 2017 was credit card fraud, particularly card-not-present fraud. In Europe, card-not-present fraud increased from 50% gross loss in 2008 to 70% last year, with most fraud impacting the UK and France. Fraud experts warn this is just the beginning. The research firm Juniper predicted a 71 Billion USD loss globally due to card-not-present fraud over the next 5 years. As history dictates, when technology advances, so do criminals.
Shoppers and businesses were warned that there might be a massive fraud spike during Black Friday weekend. But in an impressive turn against the tide, it looks like US retailers were well prepared to combat fraud this season. Unlike what was initially predicted, credit card fraud dropped for the first time over Black Friday weekend by 29%. After the industry was rocked by huge data breaches from Target and other retailers, it looks like the investments made to boost security paid off.
Technology Is the Problem and the Solution for Retail
This good news for the retail industry might be a temporary reprieve. The transition to EMV chips in credit cards plays a big role in reducing point-of-sale fraud and might account for the drop in fraud during the holiday shopping season. The reality is that fraudsters will continue to follow the consumers.
In the US, m-commerce has been increasing year-over-year. For this holiday shopping season, purchases made on mobile devices were a 36.9% of all sales, and e-commerce was up 17% from last year. As more consumers move to online and mobile shopping, expect to see more card-not-present fraud as well. Public wi-fi can encourage more consumers to use their mobile devices to shop, but all those transactions also create opportunities for hackers to get sensitive information through key-logging, phishing, and other scams. Consumers might feel protected by all the technology they are using and have no idea how just how much risk is actually connected to these conveniences. For example, shoppers in India often have 3 or more shopping apps on their smartphones and almost half of all consumers have been victims of retail fraud.
Retail shopping isn’t the only industry that should be bracing for more card-not-present fraud. The recent data breaches at financial institutions and on sharing economy platforms show that pretty much any kind of online or mobile transaction poses a high risk to consumers and businesses.
Invest in Security Now or Pay a High Cost Later
One effective security measure to protect against card-not-present fraud is to add multi-factor or biometric authentication to tie the transaction to an actual person. Linking transactions to identities can reduce the risk of fraud both at check-out as well as help to lower the amount of customer data that businesses manage and store. This means businesses can protect against fraud while also minimizing the risk of being a target for data breaches.
Investing in customer data protection and keeping transactions secure is essential in creating customer trust and loyalty. With its high competition and slim margins, the retail industry has learned that it cannot afford to be reactive and was effective in curbing point-of-sale fraud during the peak shopping season. We learned this year that other industries wrongly thought themselves to be immune to hackers. The consequences of major data breaches can last for years and be a crippling cost to many businesses.
As you prepare for 2018, make sure your business is incorporating the best practices for securing customer data and preventing card-not-present fraud. It is more cost-effective to invest in security measures now than to pay a much steeper price later.