How Omnichannel Shopping is Increasing Fraud Threat
For ecommerce and omnichannel sellers, the threat – and cost – of fraud continues to climb. The combination of cyber criminals and endless consumer data breaches are the main drivers behind this increase. And the fraud itself is more complex than ever.
Over the last several years, fraud at three stages (shipping fraud, billing fraud and shopping fraud) in the payments workflow has jumped more than 30 percent. A recent report by Experian, 2017 E-Commerce Fraud Report, shows that shipping fraud alone has increased by 37 percent; this is the point at which scammers arrange for stolen goods to arrive at their address for quick reshipping. Billing fraud, which involves an unwitting consumer’s stolen data being used to buy items for resale, reached 34 percent.
Fraud Costs Merchants Money
This increase in fraud over the last few years is expensive. Initially, it might seem like 0.9% loss to chargebacks and fraud for merchants in North America is not a huge concern. However, broken down, the typical retail margins range from 4 to 8%. That means the nearly 1% average fraud loss translates to 10 to 20% loss of profit for merchants. A staggering amount.
And where do channels fall in the discussion of fraud? Channels matter a lot to merchants and fraud analysts because each channel has its own security challenges. Customers are engaging with more channels during their shopping experience. Many merchants’ in-house programs simply cannot keep up, leaving the business at risk to major losses. On the other hand, outsourcing poses its own set of risks.
Staying informed about the current fraud landscape, customer expectations and the risks associated with fraud prevention approaches (both internal and external) will help merchants make informed decisions. Failing to prevent fraud and keep customers happy can seriously hurt your business. While merchants know that false declines are misapplied fraud controls, customers will likely assume it was a credit issue or a value judgement. This could cause the customer to be offended, embarrassed or unsatisfied with their experience.
Are you concerned about the risk of chargebacks and fraud for your business? Make sure you understand new fraud trends and stay up-to-date on chargeback protection programs. These prevention services can help your business quickly and safely manage fraud (e.g amex chargeback). Your business and customers will thank you.
Author Bio: Electronic payments expert Blair Thomas co-founded eMerchantBroker, serving both traditional and high-risk merchants. His passions include producing music, and traveling.