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Fraud Prevention in eCommerce Report 2023-2024
Fraud Prevention in eCommerce Report 2023-2024
The Fraud Prevention in E-commerce Report 2023-2034 was just released, setting the stage for the year ahead in fraud, risk, and payments. Published by The Paypers yearly, the report shares in-depth research about the fraud ecosystem to equip merchants and businesses with the knowledge to fight fraud efficiently. With updates on the latest trends in illicit activities and fraudulent tactics, the Paypers report ensures eCommerce businesses know the latest developments and the best way to fight old and new types of fraud.
With articles from industry leaders such as the Merchant Risk Council (MRC), LexisNexis, Breach Clarity, and Datos Insights, the report delves into what to expect in 2024. Here, we’ll share the report’s highlights, including key trends, Generative AI’s impact on fraud, solutions to identity theft, and how fraud fighters can overcome these challenges by partnering together.
2023 in Fraud
This past year, the MRC report on Global Payments and Fraud found that 2.9% of global eCommerce revenue was lost to fraud. Una Dillion, MRC VP of Advocacy, shares in the Paypers report that merchants need to stay informed to fight fraud this coming year. The article lists the top ten fraud types MRC identified in 2023, based on a survey of 1,072 eCommerce merchants from across the globe. They are as follows:
- Phishing/pharming/whaling attacks
- First-party misuse
- Card testing
- Identity theft
- Coupon/ discount/ refund abuse
- Account takeover
- Loyalty fraud
- Affiliate fraud
According to Dillion, merchants require “a comprehensive fraud prevention strategy that combines advanced technology, employee training, and customer education to fight these forms of fraud."
Partnerships are the key to ending scams
Scams are one of the key trends to watch for in 2024. Fraud expert Al Pascual, co-founder of Breach Clarity, acquired by Sontiq, writes about the damaging effects of scams and how they elicit trust from their victims, ultimately causing distrust in merchants. He shares how fighting scams will take true partnerships with financial services, telecommunication providers, technology firms, law enforcement, and consumers.
“Scammers are coordinated and well-organized, so they thrive when their victims are isolated. By joining hands with other organizations and the consumers they serve, merchants can act from a position of strength that enables them to frustrate scammers, protect their brands, and secure the customer relationships they worked so hard to build.”
As Generative AI (GenA) technology improves, scammers will have an increased ability to prey on consumers, making these partnerships all the more important in the year to come.
Generative AI and the ever-changing tactics of fraudsters
By 2024, fraudsters are expected to become more advanced in using GenAI fraud. Uri Arad, CTO and co-founder of Identiq, contributed to the report with his insights and predictions on how Generative AI (GenAI) impacts businesses, drawing from his experience of over a decade fighting fraud. Arad explains how GenAI takes the traditional tactics we know and drastically increases its scale and accuracy.
According to Arad, the level and speed of these attacks are unprecedented. GenAI equips fraudsters with the tools to carry out several attacks, most prominently brute force attacks, socially engineered scams, and identity fraud. Not only will these attacks be amplified, but they will also be more difficult to distinguish between fraudulent and genuine.
The article details how merchants can rely on first-party data that cannot be altered, such as physical addresses, emails, and phone numbers, with a clear digital trail. Leveraging that businesses have already validated these attributes makes them – in the correct context and combination – ideal for validating the identity of customers at scale.
Solving identity fraud with verifiable credentials
Steve Pannifer, CEO of Consult Hyperion, unravels identity fraud, why it’s so bad, and what we can do about it. Pannifer describes identity fraud as ’any type of fraud enabled by a false representation of identity.’ In the context of payment, he defines identity fraud as when either the payer’s or the payee’s identity is compromised somehow. He stresses the issue's prevalence by sharing that in 2022, there were over 1.1 million identity theft reports in the US, equating to billions of dollars in losses, according to the FTC. To solve this issue, Pannifer suggests creating robust digital identities that validate the identity of both the payer and the payee, specifically cryptographic verifiable credentials.
However, as cryptographic IDs been previously introduced, there are already identifying attributes that achieve the same purpose. The Paypers reviewed cryptographic IDs, like Sam Altman’s Worldcoin, in an article titled. “The issue with Worldcoin, blockchain, and identity validation.” Explaining the dangers of such IDs, the author describes the privacy issues of blockchain and the impracticality of such solutions, given the requirement for worldwide adoption. Instead, it suggests that we rely on attributes already validated and trusted by companies worldwide.
Read how Wix relies on the private network for identity validation to approve more payments and reduce declines
The Year Ahead
The Fraud Prevention in eCommerce Report 2023-2034 contains valuable insights and trends to help businesses and merchants fight against fraud more effectively. The report explains the various types of fraudulent attacks and emphasizes the importance of staying informed and implementing a comprehensive fraud prevention strategy. As fraudsters continue to become more advanced with the use of Generative AI technology, businesses must be prepared to distinguish between fraudulent and genuine activities. By building strong partnerships between merchants and relying on validated and trusted user credentials, companies can come together to tackle the problem in the year 2024.
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