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Report: E-commerce fraud is set to explode


Fraudsters are giving retailers another issue to contend with — and many aren’t prepared.

In 2017, there was a 200% increase in credit card testing, a tactic used by fraudsters where they test stolen credit card numbers with small incremental purchases before making large-dollar purchases on the card. This was an increase compared to the same quarter in 2016, according to new data from Radial.

Fraud also is up 30% year over year, proving to already struggling retailers that this is just the beginning of online fraud in the post-EMV world.

For many retailers, managing fraud continues to be a double-edged sword. Many either apply tools that over-reject orders, which decreases their customer transaction approvals and lose valuable revenue in return. Or, retailers build their fraud teams in-house, a move that often lacks the historical data and rules needed to catch subtle card testing tactics.

"Our data adds another alarming statistic for retailers who may be unprepared to manage fraud activity in e-commerce,” said Stefan Weitz, chief product and strategy officer at Radial.

“We know fraudsters won't stop looking for opportunities to monetize their stolen data and will even automate this process once they have a card that appears to be working,” said Weitz. "This results in quick, large volume purchases that leave retailers vulnerable. When retailers miss card testing, they're contributing to future card attacks. Fighting card testing is complicated, but can stop millions of unanticipated fraud attacks if tracked and managed efficiently."

As the fraud landscape rapidly changes, it presents pervasive and growing threats for e-commerce merchants. Since August 2016, the market segments of electronics, entertainment, jewelry, and sporting goods experienced the highest increases in online fraud during the 2016 peak season, data revealed.

"Increasing revenue has never been more important for retailers. They cannot afford to be slammed with fees that stem from missing fraud activity and must count on each good order getting approved," said Weitz. "More retailers claim they are combatting fraud, but underestimate the other areas they're endangering – like revenue and customer loyalty – when they don't use the types of data sets Radial has to increase transaction approval and take on full liability of combatting fraud.”

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