Online merchants fight to address spiralling fraud and are looking to find new solutions – most still using expensive and unsustainable in-house solutions
Businesses are budgeting more to grow their fraud teams and capabilities
Concerned merchants are increasing fraud budgets and growing fraud teams
Businesses worldwide are working hard to fight fast-growing e-commerce fraud, which is impacting their bottom line, according to new research from Ravelin.
In the last year alone, e-commerce fraud has significantly increased, posing a greater problem to businesses. In particular, online payment fraud is up 59%, account takeover has grown by 51%, while promotion abuse is up 52%, refund abuse is up 53%, and customer fraud / friendly fraud is up 40%.
To address the problem, merchants want to add more human resources to their fraud teams and increase budgets for fraud-fighting solutions.
The Ravelin research found that most online merchants (75%) intend to expand their fraud budgets in the next 12 months (global average figure.) In the UK 62% will be spending more on managing fraud. This rises to 70% in France, 74% in Germany, 69% in the US, and 84% in Canada.
Online businesses worldwide intend on adding fraud team members in the next year. Over half (58%) of UK online businesses surveyed plan to grow their fraud teams. 80% of merchants in Germany, 72% in the US, and 86% in Australia expect teams to grow in size, Ravelin has found.
New approaches are urgently needed to fight fraud and minimise losses.
Many of these businesses – 78% – are opting to build their own in-house solutions to help tackle the problem. However, these are usually expensive to maintain and quickly become unsustainable as a business grows. In the UK the figure is 80% while in France it’s 81% and in Germany 77%.
Ravelin CEO, Martin Sweeney said: “Over the years merchants have built up fraud investigation teams which they’re justifiably proud of. But fraud continues to grow and mutate: simply throwing more people and money at the problem won’t make it go away. Losses will continue to grow.
“Businesses need to get on the front foot managing fraud: using automation to nip fraudulent transactions in the bud. Better automation helps teams scale and frees up fraud investigators from mundane tasks enabling them to focus on informing product development, identifying other sources of profit erosion, and other more important strategic tasks that drive growth. With the economy in an uncertain place, enabling growth must become the priority.”
Ravelin’s Global Fraud Trends 2023 survey also examines the most effective tools for fighting fraud.
Machine learning and two-factor authentication (2FA) are being adopted more regularly by e-commerce businesses to help with the issue. Almost half (48%) of UK businesses say ML is one of the most effective tools in their arsenal. Three-quarters (75%) of UK merchants say 2FA is crucial.
From feedback across regions, the survey found that there isn’t a singular ‘one and done’ fraud strategy that’s most effective. Different solutions are effective at fighting different frauds, and having a robust tool stack allows teams to consider the complex nature of fraud.
The survey, which spoke to almost 2000 global fraud professionals, also examines the increase of ‘newer’ types of fraud which are prevalent globally.
Policy abuse is experienced by 40% of businesses spoken to. The UK has the biggest problem with this type of ‘friendly fraud’ with over half (52%) of merchants experiencing it.
Reseller and bot activity sits at 53% globally whereas ‘fraud as a service’ schemes were an issue for 56% of those spoken to. Social engineering via customer service was experienced by 45% of the companies who took part in the survey.