Ominous warning for European retailers facing a 350% increase in fraud

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As the holiday shopping season hits full stride, e-commerce retailers across Europe face a new era of fraud and malicious attacks spurred by a COVID-inspired transformation in e-commerce and a 350% increase in fraudulent online orders, according to fresh data.

Signifyd says in a new report that retailers can expect a more perilous fraud landscape through the holiday shopping season and beyond. The heightened threat is thanks in part to the growing sophistication and diversification of organised fraudster rings.

The State of E-commerce Fraud in Europe report  further reveals:

  • A 350% increase in fraud pressure by mid-2021, as measured by the Fraud Pressure Index. The index charts the change in the number of fraudulent orders detected across thousands of retailers.
  • A doubling of consumer abuse in H1 2021 — including false claims that an online order never arrived or that an order that did arrive was in unsatisfactory condition. Fraudsters and consumers make such claims in order to keep a product while receiving a refund.
  • A dramatic increase in fraudsters use of bots. Automated fraud attacks increased 146% in 2020.

“Between the acceleration of e-commerce, changes in consumer behaviour and the arrival of SCA, few would argue that commerce is not in a state of great transformation,” says Ed Whitehead, Managing Director, EMEA, Signifyd .

“The State of Fraud report lays out in detail how these changes came about and offers merchants actionable strategies and solutions to keep up in a dynamic industry at an historic time.”

The report also concludes that the pandemic ushered in a “golden age of e-commerce fraud” fuelled by several factors, the report says.

These include:

  • The increasing share of retail revenue attributable to e-commerce.
  • A dramatic wave of first-time online shoppers.
  • The need for fraudsters rings to move from protected segments of the buying journey to more vulnerable ones.

“Fraud is a moving target,” said Ollie Marshall, managing director of Maplin, and one of several retailer leaders quoted in the report. “As fraud protection becomes more sophisticated, fraud rings find new vulnerabilities to attack. We shut them down and they move on. I have no doubt they’ll be back.”

European retailers are facing historic fraud pressure at a time when the payments landscape is undergoing upheaval due to the enforcement of PSD2’s Strong Customer Authentication (SCA) requirement. The addition of SCA’s robust two-factor authentication process has been rolled out across much of Europe and will be enforced in the UK beginning in March 2022.

SCA was instituted to protect retailers and consumers from online fraud. The beginning of SCA enforcement across Europe has resulted in an average transaction failure rate of 26% post-SCA enforcement, according to payment services consultancy CMSPI.

This report explores the conversion issue and reviews some of the strategies retailers are embracing to enjoy the benefit of added protection without introducing added friction to their customers’ buying experiences.

 

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