Online retail fraud attempts up 30% in past year

Retailers are advised to brace for a higher level of fraud online and across all channels this holiday season.



That’s according to ACI Worldwide, which based its recommendation on new benchmark data from millions of transactions from large global retailers. The company noted that fraud rates by volume have increased by 30%, compared to 2014 as consumers shop with more devices online and card issuers are slower to shut down accounts after fraudulent activity.



Echoing a widely regarded sentiment, ACI said the shift to more secure EMV chip cards will tighten controls on card present transactions, leaving fraudsters to look at e-commerce channels for attempts



“When it comes to fraud, 2015 is likely among the riskiest season retailers have ever seen; and it is critical that they prepare for a significant uptick in fraud, particularly within e-commerce channels,” said Mike Braatz, senior VP, payments risk management, ACI Worldwide. “Our findings suggest that merchants must be even more vigilant and shore up e-commerce fraud protocols, which may leave online shoppers more vulnerable.”



According to ACI, fraud rates by volume have increased, with one out of 86 transactions being a fraudulent attempt in 2015, compared to one out of 114 transactions in 2014. Fraud attempt rates by value have increased by 33% compared to the same period in 2014.



The company said it is seeing new paths to fraud, including:



• Digital downloads (virtual gift cards or eGifting), which has the highest attempted fraud rate at 9.55%, followed by next day/overnight at 6.57%, international (2.38%) and buy online/pickup in store (2.15%);



• Buy online/pick up in-store attempted fraud rates are expected to increase by 28% this holiday season as a result of EMV being deployed within the card-present environment



Retailers do not require consumers to re-run cards when they pick up products in store, making this an attractive option for fraudsters, ACI said.



“We can’t overstate the benefit of a targeted risk strategy based on peak holiday periods to ensure maximum revenue while also minimizing false positives,” continued Braatz. “It is also critical for retailers to implement a real-time fraud solution, which continuously monitors fraud behavior and trends across all channels, both online and in-store.”