Credit card fraud is nothing new to online merchants. Ecommerce has faced the threat of fraud for as long as goods have been sold in the internet. However, with countless new businesses springing up and selling on the web as well as an increasing number of retailers testing the online waters, fraud is bigger and badder than ever. Likewise, instances of fraud in the ecommerce world are expected to surge, according to a number of data sources.
Ecommerce fraud is already in the rise, according to new data released by omnichannel commerce technology and operations company, Radial. In a recent PYMNTS article, Radial’s data was highlighted, showing that in the first quarter of 2017, there was a 200 percent increase in credit card testing, up from 2016. Credit card “testing” is the process in which stolen credit card numbers are tested with small purchases to ensure the account is valid prior to making larger fraudulent purchases. Radial’s data also showed that overall fraud is up 30 percent year over year. Additionally, the highest increases in online fraud since August 2016 were found to be in electronics, entertainment, jewelry, and sporting goods.
At the beginning of 2016, the retail industry was hoping that EMV chips would lead to a decrease in fraud, according to Radial. Unfortunately, even though card present fraud may have decreased over the past year because of EMV, data clearly shows that card-not-present fraud in the online arena is skyrocketing.
Michael Graff, Risk Analytics Manager at Radial explained the weakness of card-not-present security measures which happen to be the primary reason for ecommerce fraud.
“EMV has done a fantastic job at addressing card present fraud — the majority of the benefit is always going to be seen here. The debate has been more around how would it affect card not present. What happened was exactly what was expected. Fraudsters migrated from card present fraud, because it became hard, and are now focusing on card not present. As much as automation is a key principal in business, fraudsters have adopted this idea as well and are using automation in all phases of the fraud lifecycle. This is driving the increase in card testing and the overall increase in fraud.”
Are merchants doing all they can to limit ecommerce fraud? Graff shared with PYMNTS the best ways to avert future card testing claiming there are two key components to a card testing prevention strategy: detection and response.
“First, retailers must have the sensors or monitoring in place to recognize when a situation like card testing is happening. If the testing is found weeks later in a system or financial audit, it’s too late — the damage has been done. Second, retailers need to have proactive ways of restricting the activity,” he said, implying that a merchant’s security system should be configurable to recognize common data points or at the very least, allow for a manual response when the data returned is suspect.
Protecting businesses from the expected surge of ecommerce fraud will be greatly important well into 2017 and beyond. Fraudsters are getting more determined, and they are no longer deterred by conventional anti-fraud responses. Regular risk and compliance assessments are simply not enough for today’s clever fraudsters and active fraud management solutions will be required to safeguard merchants from fraud, especially as the number of online retailers grows exponentially.
National Merchants Association is dedicated to protecting businesses from fraud and is committed to providing ongoing education to merchants of all types. We also focus much of our efforts on advocacy, allowing our partners to successfully compete in their marketplaces. for more information, please contact NMA today!