A new study has found that the total cost of e-commerce fraud to merchants will exceed $48 billion globally in 2023, from just over $41 billion in 2022.
It predicts that this growth will be accelerated by the increasing use of alternative payment methods, such as digital wallets and BNPL (Buy-Now-Pay-Later), which are creating new fraud risks.
The report recommends that fraud prevention vendors focus on building platforms providing AI-powered risk-based scoring, which can be payment method agnostic, to best suit changing market conditions.
Online payment fraud includes losses across the sales of digital goods, physical goods, money transfer transactions and banking, as well as purchases like airline ticketing. Fraudster attacks can include phishing, business email compromises and socially engineered fraud.
North America Tops League Table for Fraud
The research identified North America as having the largest fraudulent transaction value of any regional market, accounting for over 42% of global fraud by value in 2023, despite representing less than 7% of banked individuals globally.
The research cited the vast volume of data breaches and the broad availability of stolen credit card information as the key risk factors in this market.
BNPL Fraud – A Major Risk
Additionally, the research found that the potential of fraud with BNPL is a major risk going forward.
Given the delayed nature of BNPL payments, fraudsters can make several illegitimate payments using stolen card details before the fraudulent activity is identified, creating significant risk.
In turn, the research recommended that BNPL vendors conduct robust identity verification at the point of onboarding to mitigate these risks.
“To combat this fraud, e-commerce merchants must implement simple steps such as address verification, combined with risk-based scoring on transactions, which will allow merchants to best mitigate the massive fraud threats present,” comments Research author Nick Maynard.
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