The festive season is one of the busiest times for businesses as consumers come out in full swing to shop for great deals.
As Asia Pacific’s e-commerce sales are expected to double nearly by 2025, reaching US$2 trillion, it is clear that more and more consumers have grown accustomed to shopping online, thanks to high internet penetration rates. The end-of-year shopping season in 2021 saw a 260 per cent jump in sales in the lead-up to Single’s Day in October.
Simultaneously, the booming industry is also attracting fraudsters looking to take advantage of a growing sector.
Online payment fraud losses are expected to exceed US$206 billion over the next five years, driven mainly by identity fraud. With the spike in shopping during festive online seasons, fraudulent actors will likely target e-commerce merchants to capitalise on the increase in sales.
How fraudsters take advantage of the holidays
There is a rise in sophisticated fraud tactics, such as promotion abuse, when fraudsters take advantage of limited-time offers by misrepresenting themselves, often by creating multiple accounts. Promotion abuse can cause significant losses to retailers, with more than half of e-commerce companies experiencing increased promotion abuse. This can be particularly impactful during festive seasons when brands are more likely to run promotions.
Other common fraud attacks, particularly during the festive seasons, include account takeover attacks and chargeback fraud. Takeover attacks refer to instances where a cybercriminal accesses a consumer’s login details and takes over an account, using it to make fraudulent transactions and purchases.
Chargeback fraud, on the other hand, is when consumers fraudulently attempt to secure a refund using the chargeback process. Instead of contacting the merchant directly for a refund, consumers dispute the transaction with their bank, thus initiating the chargeback process.
Also Read: What the payments industry should consider when preparing for the holiday season
Merchants often have limited tools to capture tell-tale signs like synthetic IDs, IP addresses, and even how long an email has been in use. These are crucial factors for determining whether the consumer is genuine. Investing in fraud prevention technology is more critical than ever, protecting merchants from excessive losses.
The effects of fraud can be devastating for businesses, from reputational costs to loss in revenue and return on marketing dollars. It is safe to say that fraud is more than just lost revenue; the time is now for businesses to ramp up their security measures.
Keeping you and your customers safe
The threat landscape will only grow increasingly complex; businesses need to better align their defences against the speed of changing fraud techniques. In the case of fraud, prevention is better than mitigation.
Promotion abuse cases can be cut down dramatically when businesses follow stringent Know Your Customer (KYC) guidelines and verify new accounts in real time.
This involves validating the data entered during the sign-up process, from email addresses to phone numbers and physical addresses, followed by validating the relationships between that data and implementing additional verifications.
These additional steps risk creating friction points in a legitimate customer’s online shopping experience, which can drive cart abandonment. KYC can be combined with other solutions to identify genuine customers seamlessly.
Digital identity verification, driven by artificial intelligence and machine learning, evaluates multiple identity elements and if they’re linked to a genuine person. This happens quickly, in the background, without impacting the consumer experience. These tools also offer a more accurate analysis rate, resulting in fewer false positives of fraud for legitimate customers.
The APAC e-commerce industry is only going to continue its growth trajectory. For merchants looking to remain competitive and provide great customer experiences, they must shore up their fraud capabilities while staving off fraudsters, all without sacrificing the seamless experience consumers expect from brands when shopping online.
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