Published: January 7, 2021
Reading time: 3 minute read
Written by: Forter Team

By all accounts, it would make sense that when online shopping increases—as it’s currently doing at an exponential rate—so would ecommerce fraud.

As online shopping continues to accelerate due to the COVID-19 pandemic, experts predict that retail sales will reach $4.13 trillion in 2020.

It’s a natural assumption, therefore, that instances of ecommerce fraud and abuse would show the same level of growth.

So why then, in industries where online sales transactions have significantly spiked, as noted in Forter’s Ninth Edition Fraud Attack Index, do the proportion of ecommerce fraud attacks appear to have decreased?

It’s all relative

 It’s a head scratcher, for sure. Short answer: it’s not that ecommerce fraud is happening less, it’s just being detected less.

Is there a lower rate of fraud since the onset of the COVID pandemic? Definitely not. Ecommerce fraud and abuse remains persistent—and likely will for years to come. In fact, ecommerce sales currently account for 14.1% of all retail sales worldwide, and Statista forecasts an increase to 22% of all sales by 2023.

Not to mention, the pandemic will lead to an additional $40 billion in online holiday revenue over November and December 2020, according to new data from Digital Commerce 360.

Why isn’t ecommerce fraud being detected?

Because fraudsters are increasingly savvy. Common forms of fraud and abuse are:

  • Policy abuse— Perpetrated by good customers (or those who might look like “good” customers), taking advantage of a business’ policies
  • Return abuse— A form of policy abuse where consumers take advantage of a merchant’s return program and policies. It can include:
    • Wardrobing: Abusers purchase an item, wear it (or use it), and then return the item back to the store for a refund
    • Returns fraud: Abusers return a different (and less valuable) item while collecting the value of the original item
    • High return rates: Consumers return a high percentage of their orders back to the merchant for a variety of reasons. (e.g. trying to qualify for free shipping or loyalty rewards, returning shoplifted merchandise, laundering money from stolen credit cards, etc.)
  • Chargeback scam — Making a purchase online with one’s credit card, then requesting a chargeback from the issuing bank after receiving the item
  • Account takeover fraud — Stealing another shopper’s identity, account credentials, or credit card to make purchases

Fraudsters have devised ways to fool legacy fraud prevention tools and game the system. Therefore, there isn’t less fraud. Transaction volumes have simply masked it, as well as online abuse and merchant vulnerabilities.

The bottom line

Being nonchalant about fraud prevention is a thing of the past. More than ever, merchants need best-in-class fraud prevention that can evolve with technology. As we know, ecommerce fraud detection requires a sophisticated fraud prevention system.

That’s where Forter comes in: through a network of global retailers, banks, and expert fraud detection technology, Forter identifies and stops fraud and abuse that other solutions aren’t able to detect. Not only does this save merchants the cost of expensive chargebacks and lost revenue, it saves time and resources, slashing operational costs.

Button up for the future of e-commerce

With Forter, you have a long-term strategy to combat ecommerce fraud beyond the point of transaction, across every touch point of the customer journey. Forter’s unique ability to distinguish good customers decreases false declines, enabling seamless approvals from login to coupon redemption, to returns through to checkout.

With this comprehensive overview of the customer journey, merchants can reduce friction in their customers’ shopping experiences, leading to decreased cart abandonment and diminished revenue loss.

As sales and technology evolve, so too should your business. Having the right fraud prevention system in place can enable your business to offer creative and competitive customer experiences no matter the fraud statistics.

Read the full Fraud Attack Index to learn more.

3 minute read