Fighting fraud online has become more difficult since the onset of the pandemic and B2C companies struggled the most with fraud, according to a new report from digital payments infrastructure firm Stripe.
Sixty-four percent of the global business leaders surveyed said fighting fraud now is harder than before the pandemic.
Spotting fraud and stopping it in its tracks is a challenge every business faces, and the ramifications can be massive.
“The business impact of fraud goes beyond financial losses. Our Stripe analysis found that the more fraud a business tries to prevent, the more likely they are to block legitimate charges as well—reducing their payment conversion rates. In an effort to reduce these false positives, businesses can manually review flagged payments, but this adds additional operational overhead,” the report found.
Thousands of new e-commerce sites cropped up during the early days of the pandemic to cater to new demand.
“We believe this growth [in businesses] created new opportunities for fraudulent actors,” the authors of the Stripe report wrote. Many of the businesses created were founded by first-time business owners, and many lacks the tools or resources to deal with fraud. Even established businesses struggled due to more complex types of fraud and higher volumes of fraud.
Stripe alone processed more than $640 billion in payments in 2021, up 60 percent from the previous year.
Forty percent more businesses experienced card testing attacks, where a fraudster rapidly tests thousands of potential credit card credentials. Card testing attacks can negatively impact businesses in a number of ways. The influx of transactions due to a card testing attack can lead to higher payment processing costs and the risk of downtime (if a business can’t handle the increase in traffic, their website can crash). In addition, successful card testing attacks damage the global financial ecosystem. Businesses are more likely to process payments from stolen cards, ultimately resulting in more disputes. Because of the risk to the financial ecosystem, businesses may be penalised by issuers and card networks for allowing card testing attacks.
Meanwhile, 59 percent of respondents expect their business to lose more revenue to fraud this year than last year. Because of fraud, 72 percent of business leaders have had to divert product or engineering resources to fight fraud, and 58 percent said they delayed expansion or investment plans because of fraud.
“We predict that businesses will adapt to these trends in four ways: 1) Interventions, such as 3DS, will play a bigger role; 2) Richer sources of data will help businesses make faster, more accurate decisions; 3) Issuers and businesses will collaborate more to streamline disputes and reduce false declines; and 4) Consumer payment preferences will continue to shift, changing the fraud landscape,” the report found.
