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Fraud Trends: 2019 Year in Review

2020 is nearly here. The time has come to reflect back on some of the biggest payment and retail trends of 2019, some of Forter’s biggest accomplishments, and what the new year may have in store (no pun intended).

A Lookback at 2019

2019 highlighted the growing sophistication in fraudsters’ methods of attack and their shift towards account-based vulnerabilities. Fraud solely at the point of transaction is a thing of the past. Large scale data breaches over the course of the year have enriched the repository of personal details available for fraudsters to exploit and leverage across brands. There were 5,183 breaches reported just within the first nine months of 2019, exposing 7.9 billion records. Hacked accounts remain the top breach type and the sheer number of exposed records is astounding, up by 33% from last year.

Alongside this massive number of breached accounts, Forter’s Seventh Edition Fraud Attack Index revealed that the dollar amount in fraud has increased by 12% (from 2018 – 2019), underscoring an increase in quality of attacks. Account data is more valuable than ever before, and enterprises need to reexamine the means by which they approach fraud prevention.

Exploiting a Streamlined Customer Experience 

As a shift away from transactional fraud persists, there has been a notable rise in fraud methods that exploit vulnerabilities connected to services intended to reward customers for their brand loyalty. To stay relevant in an increasingly competitive market, enterprises invest more in programs and experiences intended to streamline shopping for their most valuable customers. Fraudsters have taken note. These new offerings and services slated to better serve loyal customers are amongst the most underprotected areas of brand platforms, giving way to new fraud vectors.

Loyalty program fraud and omnichannel offerings including Buy Online Pick Up in Store (BOPIS) and Buy Online Return in Store (BORIS) both saw increased fraud rates this year

  • Loyalty program fraud rose 89% over the last year
  • BOPIS and BORIS fraud rates each rose by 23% over the last year

In the year ahead, look for enterprises to further develop their customer experience offerings and expand their omnichannel services. However, without the proper fraud prevention solution in place, look for fraud attack rates in these areas to continue to rise. 

Friction in the Customer Journey

In order to mitigate these emerging forms of fraud, businesses will need to strike a balance between fraud prevention while preserving a frictionless customer experience. As account-based fraud rises, companies have seen that their current fraud prevention systems are not enough. For merchants, the user experience is incredibly valuable. Any added friction to the shopping or checkout process means higher cart abandonment rates. A Forter survey reported that buyers tend to bail out of their purchases if they have to complete more than just 3 steps in their transaction. Abandoned purchases cost merchants roughly $2,500 a year per shopper, so look for 2020 to be the year of minimizing friction while championing user experience. 

A Year of Regulatory Requirements

This year also traced new developments in regulatory and compliance requirements. After investing time and effort ensuring compliance with General Data Protection Regulation (GDPR) in 2018, businesses across Europe have spent the last year (or more) focusing on preparing for the Revised Payment Services Directive (PSD2) and Strong Customer Authentication (SCA) requirements. The California Consumer Privacy Act (CCPA), which becomes effective on January 1, 2020, will likewise precipitate a shift in the US regulatory landscape for privacy. Businesses need to ensure principles of privacy and the protection of personal data are embedded into their company culture or risk facing the consequences in 2020. 

2019 was a busy year in the payments ecosystem, but also a big year for Forter! 

In Forter News…

Forter kicked off 2019 by being honored (for the second year in a row!), and included in the Forbes Fintech 50 list. This list touts the 50 “Most Innovative Fintech Companies In 2019” and includes us in their “shaping the future of payments” list. This year also saw us named to Deloitte’s Technology Fast 500 and we were the recipient of the MPE Award for Best ID, Security, and Anti-Fraud Solution in 2019. 

Priceline partnered with Forter to block the bad guys, while ensuring their good customers enjoy a friction-free experience across their travel platform. Priceline selected Forter as a key component of their strategy and the results speak for themselves. 

  • 55% Decrease in Declined Transactions
  • 52% Decrease in Fraud Chargebacks

We surpassed a significant milestone during the summer – having processed over $100B in e-commerce transactions. This is an incredible feat which no other online fraud prevention platform has achieved. Today, we now process annually over $150B in online transactions, granting us unparalleled visibility into the latest trends in both legitimate consumer purchasing and fraudulent behaviors, with a network that is 5 times the size of the largest global retailer. 

To meet shifting European compliance and regulatory requirements, Forter launched its PSD2 Solution for Merchants. This solution enables merchants to automatically evaluate the risk of each transaction and route it through the path of least possible friction, while maintaining full PSD2 and SCA compliance. 

In October, Forter released its Seventh Edition Fraud Attack Index. Our Indices (released twice each year), are consistently our most downloaded and read reports across the industry, and this edition was no different. Analyzing over $140 billion in annualized e-commerce transactions at the time of its release, this report encapsulates the most extensive research ever conducted in this field. This Index highlighted a myriad of hot topics in the e-commerce industry, examining how fraudsters are shifting their focus away from traditional point-of-transaction fraud and towards other, more vulnerable points along the customer journey, such as consumers’ accounts and loyalty points.

What Lies Ahead…

We move into 2020 with excitement and energy. Our plans for 2020 will see us further investing in and growing our incredible team of employees, refining and expanding our suite of product offerings, and striving as always, to exceed our clients’ expectations. 

2020 may see more sophisticated fraudsters than ever before. But fear not. Forter is ready to protect your business and your customers from all forms of fraud and abuse, whether at the point of transaction or along any touch point in between. Innovate, expand, grow your products and customer base in the year ahead. Leave the fraud prevention to us. 

Interested to see what Forter can do for you in 2020?

https://www.forter.com/contact-us/

Forter’s Ninth Fraud Attack Index: Ecommerce volumes are up, so is fraud - are you prepared?