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1、Insights into Payments and BeyondFraud Prevention in Ecommerce Report 2024-2025Safeguarding the Online with State-of-the-Art Fraud Prevention StrategiesEndorsement Partners:Key Media Partner:RELEASE VERSION 1.0SEPTEMBER 2024COPYRIGHT THE PAYPERS BVALL RIGHTS RESERVEDTEL:+31 20 893 4315 FAX:+31 20 65

2、8 0671MAIL:EDITORTHEPAYPERS.COMContact usFor inquiries on editorial opportunities please contact:Email:To subscribe to our newsletters,click hereFor general advertising information,contact:Mihaela MihailaEmail:Fraud Prevention in Ecommerce Report 2024-20253THE PAYPERS|Fraud Prevention in ecommerce r

3、ePort 2024-2025thank you for downloading the Fraud Prevention in Ecommerce Report the 2024-2025 edition!aiming to keep our readers in the loop with the latest developments in the fraud prevention area and how to deter fraud at the door,this edition of the report explores a complex fraud landscape wi

4、th unique challenges for online merchants and solution providers.Force and fraud are,in war,the two cardinal values,says philosopher thomas Hobbes,but can fraud be considered a value in a world that is(still)mostly guided by the rules of peace?Country conflicts seem to have steepened in 2024,while t

5、he socio-economic background continues to suffer from high inflation rates and an increase in the overall cost of living.Some unruly consumers see the current economic struggles as a reason to resort to fraudulent activities,especially when it comes to their online shopping behaviour.in fact,merchan

6、ts lost more than USD 48 billion globally in 2023 to online fraud only,which shows a 16%growth in ecommerce fraud from 2022.also,a new report from Sift suggests that 42%of Gen Z customers are most willing to commit first-party fraud,requesting a refund and keeping the items they ordered online.on th

7、e other hand,professional scammers and fraudsters intensify their attacks by deploying higher-accuracy social engineering techniques to prey on merchants vulnerabilities and cause more damage.Given the complex and ever-evolving fraud ecosystem,merchants,PSPs,and customers need a reliable source of i

8、nformation to better understand the weak points that fraudsters prey on and make ecommerce a safer place for everyone.our newest edition of the Fraud Prevention in Ecommerce Report takes a deep dive into the most important trends in fraud and fraud prevention in 2024,featuring key insights from merc

9、hants and businesses aiming to educate on ecommerces greatest vulnerabilities and how to tackle them more efficiently.The 2024-2025 edition of the report discusses evergreens,including scams,account takeover(ato),and payment fraud,as well as new trends observed in the past 12 months,including behavi

10、oural biometrics,promo abuse and refund fraud,or leveraging the use of artificial intelligence(AI)and machine learning(ML).context and the size of the marketanalysing the average cost of ecommerce fraud in 2023,Signifyd found that every USD 100 in fraudulent orders results in USD 207 in tangible los

11、ses for merchants.The losses included wholesale costs,shipping and fulfilment costs,as well as chargebacks and processing fees,which led to a rise in retail prices.The 2024 edition of Signifyds State of Fraud and Abuse Report highlights fraudsters growing sophistication,with criminal rings more acti

12、ve than bining old techniques,such as social engineering,with new technologies like generative ai(Genai)and botnets,fraudsters have become harder and costlier to spot.ForewordMirela CiobanuLead Editor at The PaypersIrina IonescuSenior EditorThe Paypers4THE PAYPERS|Fraud Prevention in ecommerce rePor

13、t 2024-2025as consumers continue to heavily rely on online shopping,thus driving the growth of global ecommerce,keeping up with online fraud has proven a difficult task both merchants and solution providers face.From payment fraud to scams,chargebacks,policy abuse,identity theft,and bot attacks,bad

14、actors use all their resources to boost their illicit winnings and perpetuate crime online.The 2024 Global Payments and Fraud Report launched by MRC states that,on average,merchants now deploy around five fraud detection tools to prevent fraudulent behaviour,including AI,ML models,and risk scoring.A

15、t the same time,the most common types of fraud merchants experienced throughout 2024 are refund fraud and policy abuse(in north america and Europe),as well as first-party misuse,ATO,card testing,phishing,and identity theft(in Latin America).Online vulnerability remains at an all-time high,with young

16、er generations being targeted by fraud rings.Social media is a prolific background for professional fraudsters to carry out their scams,and only a united front can educate users about the dangers of giving away private information and sensitive personal data.2024s turmoil is months from being over,w

17、ith 43%of people claiming they have experienced at least one type of online bined with an all-time high cost of living and an unpredictable global political climate,we might expect surges in friendly fraud,refund fraud,and scams.To stay ahead of fraudsters,deploy the latest technologies in the field

18、,and keep an eye on regulatory updates,we invite you to read the 2024-2024 edition of the Paypers Fraud Prevention in Ecommerce Report!this years highlightsThe prevalence of scams why people still fall victim to themdespite the raising awareness campaigns held by local authorities,banks,and other in

19、stitutions across the world,scams continue to remain one of the most prevalent types of fraud,both online and offline.Unfortunately,scammers have evolved at the same pace as scam detection and deterrence technologies,which is why they have been at the top of anti-fraud teams minds for the past two d

20、ecades or so.criminals now use more convincing tactics to exploit vulnerabilities in security systems,especially through Genai and its ability to mimic realistic human interaction.From phishing emails and websites to social engineering techniques,deepfakes,and romantic scams,fraudsters will stop at

21、nothing to achieve their goals.Merchants and PSPs must deploy the latest anti-scam and anti-fraud technologies to make sure they stop scams at the door and provide a seamless,safe,and secure shopping experience to users.Emerging technologies in fraudKnowing the difference between a good transaction

22、and a fraudulent one is the starting point for each fraud detection and prevention tool.However,fraudsters have perfected their techniques in attacking ecommerce vectors,leveraging customers constantly changing shopping behaviour.thus,tackling real-time threats is pivotal,and this can be done by dep

23、loying ai tools,predictive analytics,smart routing,and trained ML programmes.However,even though GenAI and ML are undoubtedly the keys to securing the future of online payments,merchants must constantly refresh their models,update their data sets,and rebuild profiles to make sure they can deter frau

24、dsters before having their businesses negatively impacted.Intelligent decisioning is one way to keep profits intact,while constantly investing in training specialised fraud teams must become the norm in the war against fraud.as fraud can happen at any time across the shopping process,even at onboard

25、ing,payment providers and banks are required to carry out strong verification checks and meet stringent know your customer(KYC)and anti-money laundering(AML)requirements.5THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025However,merchants have historically passed on implementing strong KYC r

26、equirements,fearing additional layers of friction may affect the customer onboarding process and keep legitimate shoppers away.As fraudulent activities have steepened in the past years,merchants were forced to introduce stronger identity verification checks,especially in high-risk industries such as

27、 gaming.Combined with state-of-the-art biometric technologies,these have proven efficient in not only preventing unlawful players from joining their platforms but also detecting fraud in time.Fraud on the rise in 2024 and beyond what should merchants look out for?First-party fraud,identity theft,and

28、 ato often go hand in hand with other types of fraudulent activities,including refund fraud and abuse of promotional policies.in their attempt to boost their revenues,bad customers exploit merchants lax policies and vulnerabilities.So,how can merchants protect their business while still rewarding lo

29、yalty?Distinguishing between bad actors and legitimate customers is the first step,followed by adjusting return policies based on the customers profile.Knowing the difference between wardrobers,fraud rings,and clients who abuse return policies once is key to building a strong customer profile.Mercha

30、nts must look for signs such as high return rates for expensive items,returns of items that might have been worn,or high refund rates from specific geographical areas.By deploying the right tools and constantly training their customer support teams to not give up on scammers,merchants can decrease t

31、heir return rates,maintain trust in their brands,and drive revenues.Finally,retailers should also watch out for card-not-present fraud and understand how an accountable fraud provider can diminish their fraud rates and help them boost their business without additional layers of friction.Who is who i

32、n fraud preventionFraud prevention is a multi-billion market globally,encompassing thousands of solution providers looking to meet each merchants unique set of needs.the most notable players in the industry are depicted in an in-depth infographic researched and updated by the Paypers.the Fraud Preve

33、ntion in Ecommerce Report 2024-2025 provides an overview of key companies in the industry,based on a series of solutions they offer,including customer authentication,identity verification,behavioural biometrics,fraud/risk management and decisioning platform,or chargeback management.if you are a merc

34、hant in need of a solution provider to cater to your needs or if youre curious to know how solution providers tackle fraud challenges and implement a successful model,browse through this pillar part of our report to see whats new.our commitmenteach year,the Paypers is committed to tackling the most

35、important trends in the fraud prevention industry,becoming a reliable source of information and education for our audience.the topics covered are relevant not only in understanding where fraud heads but also in understanding the overall global phenomenon of fraud and deploying new technologies that

36、keep the online space safer for shoppers.the specialists featured in the report provide their expertise and combined experience to help you build stronger business strategies and step into the new year ready to reclaim your lost revenue.Join our growing team of specialists in fraud prevention and ex

37、plore the latest edition of our Fraud Prevention in Ecommerce report!Were looking forward to having you on board!6THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025Table of ContentsForewordThe Prevalence of Scams Why People Still Fall Victim to ThemWhy Scams Still Work:the Evolution of Fraud

38、 Tactics in the Digital Age|Tracy Kobeda Brown and Leslie Green,Merchant Risk Council(MRC)Empowering Scam Protection with Cutting-Edge Device Intelligence|Claire Deprez Pipon,Worldlineemerging technologies in FraudLatest Use Cases and Developments in Artificial Intelligence and Machine LearningPrepa

39、ring for the Future of Fraud Prevention|Interview with Justin Staskiewicz,CMSPI The Role of ID Verification and Biometrics in Safeguarding Online ShoppingThe Role of ID Verification and Biometrics in Safeguarding Online Shopping|Michael Greenwood,Juniper Research Fraud Management and Intelligent Dec

40、isioning Paving the Way to Profit with Intelligent Decisioning|Interview with Erika Dietrich,ACI WorldwideFraud on the Rise in 2024 and Beyond What Should Merchants Look Out For?Refund Fraud and Policy AbuseHow Fraudsters Exploit Refund Policies and How Merchants Can Fight Back|Brian DavisCracking D

41、own on Refund Fraud and Promo Abuse:Protecting Your Business from Costly Scams|Irina Ionescu,The PaypersCard-Not-Present(CNP)FraudEcommerces Hidden Foe:the Fight Against Card-Not-Present Fraud|Mantas Eitutis,EnebaMerchant FraudThe Advantages of an Accountable Fraud Provider to Deter Ecommerce Fraud|

42、Interview with Ephraim Rinsky,Riskified Who Is Who in Fraud PreventionIntroductionWho Is Who in Fraud Prevention(Infographic)3 7 8 12 14 15 16 18 19 21 22 24 25 26 28 34 35 37 38 40 41 42 Trends and Players Shaping the Payments IndustryThe Prevalence of Scams Why People Still Fall Victim to Them8THE

43、 PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025every merchant that processes payments faces the constant threat of fraud and scams.tactics become more sophisticated and nefarious year after year,evolving in complexity and scale,as fraudsters learn from the innovative solutions those in the f

44、raud prevention industry deploy to subvert their sabotage.As these bad actors continue to find new ways to exploit vulnerabilities in our payments systems,merchants and individuals continue to fall victim to their schemes.in the following editorial we will examine the current landscape of global onl

45、ine fraud and why we still,after years of exposure and innovation,continue to be duped by fraud.the rising tide of online fraudthe 2024 Global eCommerce Payments&Fraud Report reveals a troubling,yet unsurprising trend fraud is on the rise globally.the data,collected from hundreds of merchants around

46、 the globe,shows that they faced a greater variety of fraud attacks in 2023 than in any other year.Most commonly,merchants encounter three to four different types of fraud every year,including refund/policy abuse,first-party misuse,account takeover,loyalty fraud,and triangulation schemes.Key insight

47、s Refund/policy abuse impacted 48%of merchants in 2023.First-party misuse affected nearly 45%of merchants.Account takeover is increasing in prevalence with a significant impact.Loyalty fraud and triangulation schemes are steadily emerging as major concerns.these numbers indicate a growing challenge

48、for merchants worldwide,emphasising the need for fraud prevention and management strategies that tackle fraud head-on and stay one step ahead of the perpetrators.Merchants encounter three to four different types of fraud every year,including refund/policy abuse,first-party misuse,account takeover,lo

49、yalty fraud,and triangulation schemes.Why Scams Still Work:the Evolution of Fraud Tactics in the Digital AgeMRCTracy Kobeda Brown is the VP of Programmes and Technology for the MRC.She created the American Eagle Outfitters website and served as its CISO.Leslie Green is a seasoned content marketing p

50、rofessional with over 12 years of experience.The MRC is a global non-profit membership association for payments and fraud prevention professionals.Leslie Green Content Marketing Managermerchant risk councilTracy Kobeda Brown VP of Programmes and Technologymerchant risk council9THE PAYPERS|Fraud Prev

51、ention in ecommerce rePort 2024-2025after all this time,why do people still fall victim to scams?One would be hard-pressed to find a merchant or consumer who has not been affected by fraud or scams,in one way or another.While we are increasingly aware of the ubiquitous phenomenon,many of us still fi

52、nd ourselves or those around us falling victim to online scams.there are several reasons for this persistent issue:1.Increasingly sophisticated scams.While we know that scams are out there and may think we know what to look for,fraudsters continually refine their tactics,making scams harder for cons

53、umers and merchants alike to detect.Phishing schemes,for instance,have become more convincing,mimicking legitimate communications from trusted entities to a frightening degree.2.Emotional manipulation.Scammers prey on emotions such as fear,urgency,and desperation.Creating a sense of urgency or fear

54、prompts victims to act quickly,without fully considering the requests legitimacy.mimicking a merchant to request a customer share a one-time passcode to complete a transaction is a common method of initiating an account takeover,playing on the perceived legitimacy of the request in the face of their

55、 pending transaction.3.Lack of awareness.While many merchants know about common scams,new fraud tactics can catch people off guard.continuous education and awareness are essential in combating this issue.However,the perpetrators behind these tactics know that every new trick they pull from their sle

56、eves will soon be widely recognised and less effective.One example of this evolution that both merchants and customers must contend with today is the nefarious use of artificial intelligence(AI)to generate proof-of-identity images,videos,or voice samples.We can expect this trend to grow as generativ

57、e AI continues to exponentially improve each day.4.Technological vulnerabilities.as technology evolves,so do the methods used by fraudsters.vulnerabilities in modern technologies can be exploited before adequate security measures are put in place.Furthermore,when those solutions are deployed,fraudst

58、ers immediately set to work,engineering creative ways to bypass,override,or otherwise render those solutions ineffective.5.Process vulnerabilities.Fraud protection starts with the merchants processes.Weak verification steps,overly lenient refund policies,and outdated fraud detection methods are open

59、 invitations for fraudsters to strike.according to mrcs 2024 report,up to 40%of merchants identified gaps in fraud tool capabilities as a significant challenge.Strengthening internal processes,tightening refund policies,and ensuring consistent staff training can close these gaps.Just as fraudsters u

60、se AI in their methods of attack,merchants can also leverage advanced ai-driven fraud detection tools to add an essential layer of defence against crafty fraud schemes.The financial impact of fraudaccording to the same MRC report,merchants estimate that fraud schemes drain roughly 3%of their total e

61、commerce revenue annually.This figure highlights the substantial economic burden that fraud places on businesses,which can amount to millions of dollars in lost profits.The repercussions of fraud affect everyone,from the CEO and suppliers to employees and consumers.Financial impact by region:North A

62、merica:merchants report a fraud rate of 3.3%of total revenue.Europe and APAC:Slightly higher rates,around 3.5%.SMBs:Small and mid-sized businesses experience higher fraud rates compared to larger enterprises.The repercussions of fraud affect everyone,from the CEO and suppliers to employees and consu

63、mers.10THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025Strategies for combating fraudUnfortunately,fraud is here to stay.Wherever money changes hands,a malicious entrepreneurial fraudster will lurk,waiting for the opportunity to pounce.the good news is that there are several ways merchants

64、 can protect themselves and their customers from this ever-present threat.1.Enhanced verification processes.Implementing stronger verification processes can help prevent fraud at various stages of the transaction.This includes using multi-factor authentication(MFA)and biometric verification.2.Advanc

65、ed fraud detection tools.Leveraging AI and machine learning(ML)can enhance fraud detection capabilities.These tools can analyse patterns and detect anomalies in real time,providing an additional layer of security.3.Educating employees and customers.regular employee training sessions about fraud KPis

66、 and security protocols can reduce the likelihood of merchants falling victim to sophisticated fraud schemes.For example,frequent reviews and updated training on protective policies like return windows and how to enforce those parameters with customers can help stem fraud at the front line.merchants

67、 can also shape these proactive measures into consumer awareness programmes.moreover,reminding customers never to share their passwords,account information,or other common scams like gift card purchases alerts them to be mindful of these tactics during all transactions.4.Collaboration with industry

68、partners.Working with industry partners and participating in forums,such as those provided by the mrc,can help merchants stay informed about the latest trends and best practices in fraud prevention.the road aheadAs we look towards 2024 and beyond,the fight against online fraud remains a top priority

69、 for the ecommerce industry.The data from the Merchant Risk Councils 2024 report underscores the need for ongoing vigilance,advanced security measures,and robust fraud management strategies.By understanding the numbers and recognising why people still fall victim to scams,merchants can better prepar

70、e and protect their businesses in an increasingly digital world.While the battle against online fraud is far from over,staying informed and proactive can make a vital difference for the safety of merchants and consumers alike.With the right tools,education,and collaboration,we can strengthen our def

71、ence against the ever-evolving threat of online fraud.Wherever money changes hands,a malicious entrepreneurial fraudster will lurk,waiting for the opportunity to pounce.WHER E PAYM E N TS A N D F RAU D EXPE RTS M E E T12THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025Empowering Scam Protec

72、tion with Cutting-Edge Device IntelligenceClaire is responsible for the product management of Strong Customer Authentication and Security solutions such as Trusted Authentication and Digital Intrusion Protection.With advanced payments technology,local expertise,and solutions customised for several m

73、arkets and industries,Worldline powers the growth of over one million businesses.Claire Deprez Pipon Head of Product Management,Identity Trust&Authentication WorldlineArtificial intelligence(AI)is reshaping the fraud landscape,introducing sophisticated new threats,while simultaneously presenting opp

74、ortunities to combat fraud through advanced security solutions.How ai propels fraudsters adaptation to new heightsScams are becoming increasingly sophisticated,with criminals using more convincing tactics and exploiting vulnerabilities in security systems,especially through generative ai and its abi

75、lity to create realistic human interaction.Hyper-realistic phishing emails and websites are now being crafted with ai,mimicking the look and feel of legitimate banks.Furthermore,sophisticated voice cloning allows ai to create voice clones of bank representatives,making vishing scams more convincing

76、and harder to detect.ai is also automating social engineering,crafting personalised messages,and adapting to user responses to manipulate victims.additionally,it can generate fake news articles and social media posts to spread misinformation about banks or financial products.enumeration attacks have

77、 also become more prevalent,with ai helping robots test card Bin numbers on merchant websites to validate the existence of cards,which are then sold on the black market.the primary aim of scams and social engineering is to deceive their targets,whether to pilfer the payers credentials or personal in

78、formation to carry out an authenticated payment by themselves(resulting in unauthorised payment transaction),or to persuade payers to take prompt,often rushed actions,such as initiating a credit transfer(resulting in authorised payment transaction,or authorised push payment fraud/scams).However,it i

79、s unmistakably this latest form of fraud,known as impersonation fraud or spoofing,that has experienced a significant surge in recent months.According to EDC,Authorised Push Payment(APP)fraud losses across Europe could be as high as EUR 2.4 billion,increasing by 20%-25%yearly.regulatory responses to

80、evolving threatsregulators are deeply concerned about this ever-changing threat landscape.one notable example is the european commissions proposed PSD3,which encompasses fresh Payment Services Regulation and updated Payment Service Directive.These enhancements would bring liability for Payment Servi

81、ce Providers(PSPs)and introduce reimbursement regulations for APP fraud,alongside the introduction of a Verification of Payee(VoP)scheme,aimed at IBAN/name matching verification services.WorldlineThe key to combating increasingly sophisticated fraud lies in deploying equally advanced solutions.13THE

82、 PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025the imperative for advanced security solutionsthe key to combating increasingly sophisticated fraud lies in deploying equally advanced solutions.the rapid advancement of generative AI has significantly accelerated the pace of financial crime,pos

83、ing a formidable challenge to human identification of fraudulent panies that fail to integrate ai into their systems and adapt to evolving threats will struggle to keep up with the speed and adaptability of fraudsters attacks.While nearly 50%of financial institutions acknowledge the use of AI and ma

84、chine learning to detect unknown fraud cases according to GBG,many still rely on restricted data sources despite recognising the critical role of technology in this ongoing battle.Artificial intelligence is changing the game,offering price threat detection,minimising the impact of cyberattacks,and e

85、nhancing the efficiency of cybersecurity,but it still requires access to the right data.Worldline Digital Security Suite for advanced fraud scoringWorldline Digital Security Suite stands out as a robust and adaptive response to the relentless threat of fraud and identity theft,based on device intell

86、igence.Our solution produces various scores,each designed to fulfil a specific purpose and address a distinct type of fraud.the prevention score is the first line of defence,an initial check that prevents potential threats from progressing further.It ensures the device used to access services meets

87、the standards of our security policy.Checks are made,on various elements such as root/jailbreak mode,virtualisation,the potential use of harmful extensions or plugins,and others.this score helps assess the risk of tampering or malware presence on the device.the footprint score,functioning like a dig

88、ital detective,observes and records the unique characteristics of the device used and browsing habits.It easily detects identity counterfeiting attempts through unusual changes in configurations or hardware components.It can create alerts when a new device is used and can compile a blacklist of devi

89、ces and behaviours associated with fraudulent activities.the behavioural score best embodies our personalised and adaptive approach to security.it monitors how the user interacts with the device:orientation,movement,keystrokes.these behavioural data,captured non-intrusively,are essential for detecti

90、ng unusual patterns that could indicate phishing attempts or,worse,a remote takeover by a cybercriminal.this score also allows for continuous validation of the users identity without bothering them with superfluous authentication requests,providing a seamless and secure experience.the combination of

91、 these scores provides a comprehensive overview that ideally complements existing fraud systems based on purchasing behaviour analysis.unfortunately,these systems heavily depend on the country,the means of payment(card,transfer,etc),and the type of card(business,consumer,etc.).in contrast,our device

92、 intelligence scores work regardless of the use case,making it a unique fraud detection tool.Worldline Digital Security Suite has been awarded in June 2024 by the Pay tech awards of the best ai tech of the Future from Fintech Future.click here for the company profileEmerging Technologies in FraudLat

93、est Use Cases and Developments in Artificial Intelligence and Machine Learning16THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025Justin Staskiewicz,CMSPIs Director of Fraud Solutions,brings over a decade of expertise in fraud prevention and leadership in payment acceptance and fraud solutio

94、ns for global merchants.CMSPI partners with hundreds of Global 500 merchants to save them millions every year,leveraging the combination of specialist expertise and the CMSPI Platform.Justin Staskiewicz Director of Fraud Solutions CMSPIHow has fraud prevention changed since you joined the industry?W

95、hen I started out,the technical barrier to entry for fraudsters was high.Flash forward to today and there are avenues to commit fraud that require no technical know-how fraudsters dont even need to get on the dark net and buy credentials.Granted,that means a lot of green fraudsters rather than crimi

96、nal masterminds,but the story for a lot of merchants is death by a thousand cuts:plenty of minor actors doing bad things that add up to a major problem.the rationalisation for committing fraud has changed too.if someone knows they can claim they didnt make a purchase and the bank wont ask any questi

97、ons,then it may become the norm.That moral grey zone combined with financial hardship makes it easier for people to digest getting involved with friendly fraud.How have merchants adapted?Firstly,they are talking about fraud prevention.Some organisations that never had a dedicated fraud team before b

98、uilt one in the last decade.Previously,in some instances even the existing fraud teams didnt really interact with the broader organisation.currently,we are seeing that most work closely with customer service,digital experience,payments,treasury,it,and security to manage risk.As well as being confine

99、d to one team,the information those teams had access to was historically siloed to their own business.today,merchants are using external resources to broaden their perspective and stay informed.that might be third-party providers,networking events,trade associations,consultancies,or peers they have

100、good working relationships with.CMSPIWe interviewed Justin Staskiewicz,Director of Fraud Solutions at CMSPI,about his advice for developing a future-proof fraud prevention strategy.If someone knows they can claim they didnt make a purchase and the bank wont ask any questions,then it may become the n

101、orm.17THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025What role do machine learning(ML)and artificial intelligence(AI)play in merchants approaches?Firstly,we need to make the clear distinction between AI and ML,as many confuse the two and wrongfully tag something as AI when they really mea

102、n ML.Similarly,people who five years ago called something ML were talking about predictive model indices.However,ML will be the future of both fraud and fraud prevention.Artificial intelligence encompasses the idea of a machine that can eventually mimic human intelligence,whereas the process of mach

103、ine learning implies teaching a machine how to perform a certain task and provide accurate results by identifying patterns.the days of someone writing a script and leaving it unattended are over.even rulesets are largely legacy technology today.now,a merchant needs a robust solution that is managed

104、constantly.Within the next five years,we can expect to see ML models fighting other ML models in the fraud space,with people acting as their caretakers.What will be the biggest challenge for merchants in preparing for that future?the biggest challenge is convincing an organisation that change is wor

105、th the investment,especially when the potential roi is speculative.Another one is balancing risk and the customer experience while making sure the size of the hammer fits the nail youre striking at.many of the merchant teams we work with wouldnt even want a customer to know that something had change

106、d in their payment flow.But there are times when they must ask for additional information,so it is extremely important that merchants understand the utility of each data point they are collecting to be able to propose friction-reducing initiatives too.if im a merchant reading this,whats a sign that

107、i need to reset my fraud strategy?one is getting an idea of others KPis within the industry,and whether you fall within them.People often talk at conferences about KPis that seem too high to me,but that they have accepted as a cost of doing business.the second is planning for the future.if youre hea

108、ring about new fraud attacks and thinking about your own infrastructure,would you have confidence that your systems could mitigate the same attack,or at least know it was happening?Chargebacks are easy to see the networks will flag those to you but with some fraud types you may not know you have a p

109、roblem until you turn over the right rock.What should merchants do next?Firstly,identify your unique fraud environment and work with your partners to target it.When I worked in telecoms,the main attack vectors for fraud were ID fraud and business fraud.In contrast,in the quick service restaurant(QSR

110、)sector,it was primarily related to USD 25 gift cards.Those are two entirely different fraud worlds to operate in.then,you need to assess how your tools relate to those use cases.many vendors out there are very eager to hear merchant feedback about their products and willing to add things to their r

111、oadmaps.if their incentives are not aligned with your own approach,then its time to work with them more closely.Finally,dont forget that every thank you to an AI assistant keeps SkyNet at bay for another month.Machine learning will be the future of both fraud and fraud prevention.The Role of ID Veri

112、fication and Biometrics in Safeguarding Online Shopping19THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025The Role of ID Verification and Biometrics in Safeguarding Online ShoppingA Senior Research Analyst at Juniper Research,Michael Greenwood primarily conducts research on digital identity

113、 and payments markets.Juniper Research specialises in providing best-in-class market research across mobile,online,and disruptive technologies.We offer in-depth reports,forecasts,annual subscriptions,and consultancy.Michael Greenwood Senior Research Analyst Juniper Researchonline shopping is fast be

114、coming the norm,with nearly three billion people making online purchases in 2023,according to Juniper research data.this shows the massive strength of the global ecommerce adoption,which opened up a range of new fraud threats to consumers and merchants.these threats are varied in nature,including tr

115、ansaction fraud,account takeover(ato)fraud,and other kinds of fraud.Fraud can happen starting from the onboarding process,with the creation of a fraudulent account,the use of stolen payment credentials,and fraudulent returns.Merchants and ecommerce platforms are now using identity verification solut

116、ions to mitigate the risk of fraud.Identity verification is the process through which an individual is validated as being who they claim to be,and the correctness of their attributes.This means identity verification includes age verification,address verification,and verifying ownership of a payment

117、credential.Verification is generally completed by the users bank or payment provider.These institutions are required to carry out verification checks,whereas the merchants often are not.Banks must meet stringent know-your-customer(KYC)and anti-money laundering(AML)requirements,meaning that if the pa

118、yment is authorised by the bank,there is a high likelihood of the user being legitimate.However,this presents two primary issues.First,if the banks checks do not catch fraud,the merchant wont either.Second,this does not protect the merchant from legitimate accounts committing fraud against them,such

119、 as in the case of chargeback fraud.In heavily regulated industries such as gambling,merchants are already required to conduct their own identity verification checks.in these cases,a trusted identity is created at the onboarding stage,with age and address checks being done at this point.When a custo

120、mer tries to use the service,they are checked against this trusted identity.Many ecommerce websites,such as Amazon,have moved into the grocery sector,and supermarkets have also significantly grown their online presence.These services will offer consumers access to age-restricted products,such as alc

121、ohol and kitchen knives.To sell these items,the merchant must perform age verification checks.Merchants must digitalise their age verification methods by requiring the user to present an ID,and then take a selfie to confirm the identity on the ID.Juniper ResearchEcommerce platforms must look to util

122、ise biometric verification in combination with eID documents to provide a trusted ecommerce environment.20THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025if ids have nFc(near Field communication)chips,the information can be extracted using an nFc-enabled smartphone.if this is not available

123、,a photo of the ID can be read using OCR(Optical Character Recognition).With digital IDs being rolled out over the coming years,the process of checking a users identity will eventually become entirely digital,boosting customer convenience,as the id will be stored on the device used to make the purch

124、ase.These ID verification methods are harder to bypass than simply requiring ID at delivery.Delivery drivers are not trained to spot fake IDs,and time pressure for deliveries will likely result in IDs being less carefully checked.Digital methods can use artificial intelligence(ai)to check documents

125、for security features,preventing minors from using fraudulent ids,or another adults id.The challenge with implementing strong identity checks is striking a balance between offering a low-friction service and preventing fraud.increased friction will reduce completed sales,costing the merchant.However

126、,fraud also presents costs to the merchant,meaning merchants are looking to strike the balance that sees them lose the least money across both challenges.This balance is not stationary;identity verification technology is evolving,increasingly utilising mobile devices biometric capabilities to offer

127、seamless user verification.Types of fraud are also changing,with some categories,such as refund fraud,seeing growth.as shown in Figure 1,these trends will lead to an increase in the number of identity verification checks being carried out for ecommerce.Figure 1:Total number of ecommerce payments tha

128、t require a digital verification check globally per annum,2024&2028Source:Juniper ResearchA key technology for facilitating these checks is biometric verification,especially facial recognition.Facial biometrics use the pattern of a users face to compare it to a trusted template of their face,thus ve

129、rifying their identity.these templates are made up of the unique mathematical and dynamic patterns of the users face and can be 2D or 3D.While 2D facial recognition can be spoofed by Hd photographs,and 3d facial recognition by high-quality masks,when used in combination with liveness detection,it be

130、comes almost impossible to trick.the evolution of deepfakes poses a potential threat,particularly as the technology improves but,currently,liveness detection catches the majority of deepfakes.Identity verification is vital in protecting users from account takeover and merchants from various forms of

131、 fraud.Ecommerce platforms must look to utilise biometric verification in combination with eid documents to provide a trusted ecommerce environment.Fraud Management and Intelligent Decisioning22THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025Erika is a fraud and analytics expert with 20 ye

132、ars of experience in payment acceptance optimisation,global fraud prevention,and other tech solutions.ACI Worldwide is a global leader in real-time payments software.It combines a global footprint with a local presence to drive real-time digital transformation for payments and commerce.Erika Dietric

133、h VP of Analytics&Optimisation Payments Intelligence ACI Worldwideis it time for ecommerce brands to take a fresh look at fraud management?it is about moving the expectation beyond fraud management to decision precision by using accurate real-time fraud data and unique behavioural insights to spot o

134、pportunities while preventing attacks.today,it is hard to stay ahead using advanced predictive analytics and patented ai.this technology constantly monitors payments,prevents revenue leakage,and optimises acceptance.With so many tools on the market,why do merchants still struggle with real-time frau

135、d decisions?Knowing the difference between a good transaction and a bad transaction sounds easy,but,in truth,its never been harder.Ecommerce has many attack vectors with fraudsters using more complicated tactics and constant consumer preferences.tackling real-time threats requires real-time action a

136、nd plenty of automation.this is challenging when there is no certainty of identity,consistent buying behaviours,or obvious red flags to separate fake from genuine customers.Even with extensive tools,a merchant can quickly become overwhelmed with data and rules,not knowing what actions to take to pre

137、vent fraud in real-time.the business may already use ai tools,predictive analytics,or smart routings,but may lack the understanding to apply these intelligently to optimise acceptance while detecting and minimising fraud.is poor insight contributing to issues like returns abuse and synthetic fraud?c

138、onvenient returns are essential for all online businesses and a deal-breaker for customers buying unfamiliar brands or products.Free returns,convenient in-store,collection,drop off,receiptless returns,and instant refunds are key differentiators but expose merchants to friendly fraudsters and crimina

139、ls.Its also expensive with shipping and processing eating into profits.Disconnects between front and back-end processes create gaps that allow fraud to go unnoticed,so fraud solutions must reach beyond the checkout to unify insight from multiple data sources.That means consolidated intelligence and

140、pooling different merchant information to tackle this industry-wide issue.our data shows synthetic identity fraud is an urgent issue.it can rack up to nine times more than the average ACI WorldwideErika Dietrich,ACI Worldwides VP of Analytics&Optimisation Payments Intelligence,explores the use of tr

141、ansaction intelligence for ecommerce businesses to work faster.23THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025fraudulent transaction.While data-rich analytics can automatically consolidate multiple signals and more easily determine digital identity,it also requires seamless monitoring a

142、cross every touchpoint to avoid challenging genuine customers.thats why acis digital identity services,part of aci Fraud management,capture pre-authentication,transactional data,and post-authentication information.What else is important when looking to make better decisions at scale?Firstly,advanced

143、 technology and extensive data need to complement each other.To use AI effectively for real-time decision-making,you should consider all your needs,evaluate data extensibility,and orchestrate different elements at each step of the customers journey.Predictive modelling,if used alone,can lead to inco

144、nsistent decision-making.So,its best to support it with comprehensive data and collective intelligence.to address this issue,organisations are incorporating the concept of signals into their payment and decision-management strategies.What are signals and why are they important for real-time fraud de

145、tection?A signal is the payments DNA.It reflects probability and reveals the true nature of a transaction,adding a layer of precision to the decision-making process and reducing bias.Signals can be used to validate the nature of fraudulent transactions and to build consumer profiles.With the right A

146、I tools and signal sources,fraud teams can deep-dive into advanced profiling,digital identity,and machine learning scores,and build outcome-focused reporting structures.This is also called fraud orchestration and represents an effective way to navigate the complexity of fraud while optimising accept

147、ance and reducing the cost burden.it encourages predictability and automates model updates.in addition,it future-proofs merchant defences and empowers the actual user with the expertise of a data scientist.do you have any advice for those looking to optimise their investment?choose a multilayered fr

148、aud management solution that lets you easily orchestrate new and existing data one that gets you to market faster via a single aPi integration.this will help avoid disruption and keep costs low.try to leverage dedicated ai models that run in sync,to build stronger performance and precise customer pr

149、ofiles for enhanced future decision-making.Finally,work with collaborative partners,like aci,that can help you balance the total cost of fraud management,security,and seamless conversions with intelligence decision-making and auto-optimisation to help improve precision around chargebacks,disputes,an

150、d refunds.Should future consumer privacy standards like the EUs AI Act affect the use of AI today?Fraudsters are using AI.Merchants need to fight fire with fire.AI can help merchants make sense of big data in real-time,allowing them to stop fraudsters while building better customer experiences.This

151、creates safer returns/refunds with higher acquirer and BIN-level approval rates,without compromising consumer privacy or future compliance,confidently builds precise decision-making processes,and boosts revenue with signals.As payment methods and verification processes evolve,AI and signals will con

152、tinue to deliver the intelligence merchants need to elevate risk strategies and boost business performance.it can also pave the way to deeper customer understanding and ultimately hyper-personalisation.click here for the company profileTrends and Players Shaping the Payments IndustryFraud on the Ris

153、e in 2024 and Beyond What Should Merchants Look Out For?Refund Fraud and Policy Abuse26THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025How Fraudsters Exploit Refund Policies and How Merchants Can Fight BackBrian Davis puts together fraud teams from scratch and helps them build their strate

154、gy to scale fraud to align with their companies lofty goals.His internal goal is to help the community find their voices and be seen as the true experts they are.Brian Davis Head of FraudOnline shopping has made life easier but it also opened doors to fraudsters who abuse refund policies.Since refun

155、d policies are crucial for customer satisfaction,scammers target them to cheat the system.understanding refund fraudHow prepared is your business to combat the growing threat of refund fraud?refund fraud is when someone seeks a refund for a product they already have.the goal is to keep the item with

156、out paying.this malicious practice exploits a retailers return policies,as it lets fraudsters use the system for personal gain.unfortunately,it is also a growing problem,especially with the rise of ecommerce.Fraudsters trick merchants into refunds using fake receipts and disputes.they order a pricey

157、 item,claim it never arrived,and demand a refund while keeping the item.this is called refund fraud,and it is costing merchants millions every year.Spot refund fraud warning signsRecognising the early signs of refund fraud can help you prevent significant losses.Here are the key warning signs to wat

158、ch for:High return rate for expensive items;returns of items that appear worn or previously used;Frequent return requests from the same customers;High refund rates from specific geographical areas;repeated complaints of non-delivery,despite tracking;requests for partial refunds on large orders;High

159、volume of returns from first-time customers;returns of items with missing parts or accessories.tighten your refund policiesA vague or lenient policy invites scammers,so its time to tighten up.Firstly,consider defining refund conditions clearly.Require proof of purchase and set a strict timeline of a

160、round 30 days for returns.Secondly,include rules to prevent refund abuse.For example,Brian DavisRecognising the early signs of refund fraud can help you prevent significant losses.27THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025if you sell electronics,your policy might say that only unop

161、ened items can be returned for a full refund.For opened items,offer store credit instead.this discourages serial returners who may be gaming your system.track data on sales,returns,and refundsIts nearly impossible to fight refund fraud without data.Thus,you should collect data on every sale,return,a

162、nd refund.Store it in a centralised system and analyse this data regularly to spot trends.Look for spikes in refund requests after major sales or unusual return rates for specific products.For example,if an items return rate is unusually high,investigate this.A flaw may exist in the product,or fraud

163、sters may be targeting it.Implement customer verificationrefund fraudsters often use stolen identities or fake accounts to request refunds.to counter this,strengthen your customer verification process.Use MFA for customer accounts,especially during refunds.Require customers to verify their identity

164、via SMS or email before a refund,as it would cross-check customer data against a global database of known fraudsters.this adds security and makes it harder for fraudulent refunds to go unnoticed.track the refund rate closelyKnowing your numbers is key to detecting refund fraud.Set a baseline refund

165、rate based on your historical data and industry standards.if your current refund rate exceeds this baseline,something might be wrong.investigate the cause,whether its a product issue,a policy gap,or potential fraud.For example,if your policy expects a 5%refund rate but youre seeing 10%,consider iden

166、tifying the root cause early that can save you significant losses down the line.monitor the entire user journeyFraudsters are becoming more sophisticated,so relying on a single data point wont cut it.instead,you need a complete view of the customer journey to stop refund fraud.Collect and analyse da

167、ta from the entire customer journey,from the first click to the purchase and possible refund.Watch for inconsistent behaviour which might include mismatched shipping and billing addresses,frequent changes in contact info,or multiple accounts from the same iP address.cross-referencing these data poin

168、ts helps you spot fraud patterns.Set up return merchandise authorisation processesan rma process can cut refund fraud as it ensures that refunds are not issued until products are returned.require customers to obtain an rma number before returning any product,and tie this number to their original ord

169、er to track the return process.after receiving and inspecting the product,you can issue a refund.If a customer claims they never got a package,ask them to complete an affidavit before issuing a refund.this not only deters fraudulent claims but also provides documentation in case of disputes.educate

170、your customer service teamYour customer service team is on the front lines for refunds.Teach them to spot and deal with suspicious refund requests.Finally,look for customers who often request refunds or get defensive when questioned about their returns.Give them a checklist of steps to verify before

171、 approving any refunds.three key takeaways to safeguard your business1.Tighten your refund policies.clear,strict rules reduce fraud risk.2.Use data and tools.track patterns across the entire user journey.3.Train your team.Teach staff to spot and stop refund fraud early.28THE PAYPERS|Fraud Prevention

172、 in ecommerce rePort 2024-2025Cracking Down on Refund Fraud and Promo Abuse:Protecting Your Business from Costly ScamsIrina is a Senior Editor at The Paypers,specialising in fraud and online payments.With a Ph.D.in Economics and a strong economic academic background,she observes developments in tech

173、,innovation,and regulation,educating the audience about fraud prevention,chargebacks,scams,social engineering,digital identity,GenAI,and ecommerce.Irina Ionescu Senior Editor The Paypersthe current state of promo abuse and refund fraudRefund fraud and promo abuse/fraud represented the most challengi

174、ng fraud types for merchants and marketplaces throughout 2023 and Q1 2024.Following a surge in ecommerce transactions and in businesses looking to increase their revenues and retain clientele,fraudsters have discovered new ways to draw illicit funds and obtain goods.refund abuse,return abuse,or refu

175、nd fraud represents the action of a customer requesting and receiving a refund for a purchase they claim is either incomplete,unsatisfactory,or inexistent.taking advantage of lax return policies from some ecommerce merchants,customers ask for a refund for a series of reasons.According to the Ravelin

176、 Consumer Fraud Survey 2023,the cost-of-living crisis,the COVID-19 pandemic,unemployment,starting school/university,or a new family member represent the main triggers for consumer fraud in the uK,France,and Germany,europes biggest ecommerce markets.on the other hand,a recent survey from Sift claims

177、that younger generations,such as Gen Z,are more willing to commit first-party fraud,even when the product they ordered is delivered in perfect shape.the younger the consumer,the more likely they will dispute an order and claim back their money,even after receiving the items.Thus,42%of Gen Z will eng

178、age in first-party fraud,while only 22%of millennials and 10%of Gen X will do the same.according to the 2024 Global Ecommerce Payments&Fraud Report released by the Merchant Risk Council(MRC),refund/policy abuse surged in North America and Europe,especially for SMEs and mid-market merchants.In the As

179、ia-Pacific area,the same type of fraudulent activity ranked second,while Latin America continues to handle more cases of card testing,phishing,identity theft,and account takeover(ato).The PaypersEach fraud type has its season,with gift card fraud,for example,seeing spikes around Christmas,Valentines

180、 Day,and Mothers Day.29THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025it is interesting to explore the months during which refund and promo abuse surge,especially in the worlds biggest ecommerce markets.consultancy company Reid suggests that January might be retailers achiles heel,with pl

181、enty of customers willing to get refunds or exchanges for unused holiday gifts.The National Retail Federation in the US claims that customers have returned USD 816 billion in merchandise(or approximately 17%of goods sold)in 2022 alone.And,while many of these returns and requests for refunds are legi

182、timate,January also looks like a good month for fraudsters to try their luck online.At the same time,Riskified suggests that each fraud type has its season,with gift card fraud,for example,seeing spikes around Christmas,Valentines Day,and Mothers Day.ecommerce fraud is more likely to see an increase

183、 in chargebacks after the holiday season,while policy abuse,including refunds,returns,resellers,and promo fraud,fastens in the summertime.But why do light policy abusers and fraudsters tend to become more malicious during the hot summer months?an interesting survey conducted by the Massachusetts Mut

184、ual Life Insurance Company(MassMutual)showed that customers in the US spent an average of USD 765 more per month in 2021 compared to the same time in 2020.Thus,the answer is simple people experience a fear of missing out and tend to make up for as much daylight time as possible by having a more acti

185、ve social life which requires new outfits for parties,dinners,vacations,festivals,tools to work around the house,or new camping accessories.this translates into hectic shopping behaviour,with customers trying to work around returns and refund policies to make the most bang for their buck.However,mos

186、t of these summer fraud perpetrators are not abusers making a living off scamming merchants but rather average customers who want to shop more and still have enough cash for vacations and experiences.Promo abuse and refund fraud how far can fraudsters go?not all customers requesting a refund are bad

187、 actors but some abuse merchants light policies.in June 2024,the US Attorneys Office unmasked the case of five sisters who exploited a merchants system for quick returns,stealing more than USD 1 million over the course of two years.The sisters ordered multiple shipments weekly from a victim company,

188、often using several different accounts and asking for refunds,sometimes even before their orders arrived.the refund was processed quickly and a return credit was issued within two hours via email.However,the sisters never mailed the merchandise back but,instead,travelled to the merchants in-store lo

189、cations across several states(including arizona,colorado,california,Florida,michigan,and nevada)to return the merchandise for a second refund.Big retailers are often the targets,as they are keen on providing lax return policies for low-value orders to retain and increase their customer base.this was

190、 also the case for amazon,where a fraud ring operated at an amazon call centre in india to make millions off fake returns.An organised crime group named REKK allegedly logged fake returns in the merchants systems so buyers could keep high-value merchandise,such as apple products,and still get a refu

191、nd.using social engineering techniques,phishing attacks,and even bribing Amazon employees,the group even offered a paid service to shoppers willing to exploit the companys return system vulnerabilities.REKK even advertised its services in a private Telegram channel with over 30,000 followers,offerin

192、g packages of different values for people willing to try their luck in the professional scamming life.In the US alone,refund fraud cost merchants up to USD 101 billion in 2023.30THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025However,channels like the one from reKK are popping up more ofte

193、n over the dark web and telegram,an app known for its end-to-end encryption messages that represent a haven for criminals and terrorists.Noirs Luxury Refunds and Refunds by Santa are other Telegram channels whose members provide fraud-as-a-service packages,starting for as little as USD 999.Intereste

194、d customers do not only receive mentorship;in exchange for each successful scam,they must pay a percentage of the product price to the leaders of the group.Noirs Luxury Refunds channel operated between 2020-2022 and had around 6,000 members.a group member was prosecuted and pled guilty to participat

195、ing in a fraud conspiracy in march 2024.understanding promo abuse and refund abuseThe practice of abusing a merchants promotional policy is also known as promo abuse and refers to four main aspects exploiting discounts,stacking codes,creating fake accounts,and using bots.often enough,specialised fra

196、udsters use a combination of these traits that can also be linked to other types of fraud such as carding and ato.Individuals or groups misuse promotional codes and discounts intended for specific purposes to purchase goods at a better price and later resell the items for a higher price,obtaining a

197、profit.Combining multiple promotions or discounts is also known as stacking codes,and represents a popular technique used by many,even unintentional,fraudsters.Similarly,during big sale days(such as Black Friday,cyber monday,or any other private sale held by a merchant),fraudsters use automated soft

198、ware programmes designed to rapidly purchase discount items or redeem promotions that will be later used with the same scope to be resold for a higher value.at the same time,refund abuse can be divided between false claims,item switching,or multiple returns,each with the scope of scamming the mercha

199、nt and not sending the purchased merchandise back after receiving an order.in these cases,customers often falsely report faulty or missing items from an order or even choose to return a different item instead of the one bought to receive a refund.item switching is often encountered by luxury product

200、 merchants and resellers,where the customer returns a low-quality version of the product or even a counterfeit item for a refund while keeping the original item.the impact of promo abuse and refund fraudIn the US alone,refund fraud cost merchants up to USD 101 billion in 2023,quickly becoming one of

201、 the most expensive types of fraud in ecommerce.However,apart from the direct financial losses of e-merchants,companies may also have brand reputation impacted negatively,and customers lost.if not treated correctly and promptly,customer loss leads to an even bigger revenue loss.at the same time,refu

202、nd fraud also puts a toll on customer service and internal fraud investigation teams,as they may face an increased workload and even operational disruption.Finally,merchants that face high fraudulent return rates will be less inclined to offer promotions or discounts in the future,which may negative

203、ly impact customers,especially during the current global economic climate.Balancing a customer-oriented internal policy regarding returns and refunds while also staying ahead of fraudsters is a struggle for most merchants.31THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025identifying serial

204、 promo abusers and fraudstersThe main struggle of fraud departments is to accurately distinguish between cases of first-party misuse(unintentional purchases),casual refunders(also known as wardrobers),and professional refunders(usually part of a fraud ring or a criminal organisation).Fraud analysts

205、must pay attention to several behavioural patterns from online consumers,including former orders,and analyse previous purchases to identify fraudsters.usually,the process follows three steps:1.Data analysis:during this stage,fraud analysts track purchase patterns,refund requests,and customer behavio

206、ur to identify potential fraud;2.Verification processes:in this stage,fraud teams implement verification measures to confirm a customers identity and prevent the creation of multi-accounts;3.Fraud detection software:Utilising advanced software which integrates machine learning(ML)and artificial inte

207、lligence(AI),fraud teams can detect unusual activities and identify potential fraudsters.How can merchants fight promo abuse and refund fraud?Opportunistic fraudstersFor merchants to stop the cycle of abuse and deter fraudsters at their door,they must first identify the type of customer they are han

208、dling.Based on the characteristics above,opportunistic fraudsters,wardrobers,and serial fraudsters who are part of fraud rings have different modus operandi.Therefore,a deep dive into their client history may reveal several red flags.In the case of opportunistic fraudsters,setting clear policies and

209、 consequences(i.e.sending reminders via email or app notifications)will mainly make customers follow rules about refunds,and lower the rate of returns.at the same time,making unlimited returns an earned benefit could not only drive customer loyalty but also keep potential opportunistic fraudsters aw

210、ay.Some merchants also require an affidavit of non-receipt or make a client sign a document claiming they did not receive the package/do not want a certain item from their order.Finally,implementing stronger know your customer(KYC)requirements in the return flow will make it harder for opportunistic

211、 fraudsters to ask for refunds,which,most likely,will keep them away from your business.32THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025WardrobersKeeping up with the current cost of living and things isnt easy for many of us,but some take it to another level,wearing expensive clothing on

212、ce and then returning it for a full refund.merchants must allow this if tags are untouched,but this practice puts a toll on their business,costing them millions of dollars per year in shipping,cleaning,and restocking warehouses.The first step in deterring wardrobers is to send email warnings and not

213、ifications to seize their actions.This is a clever way of saying your fraud team has detected a pattern and that customer is flagged.Repeated offences can lead to banning the customer from your platform.Another way to fight against wardrobers is to limit them from requesting a refund for some reason

214、s if you notice those are heavily used in their purchase history.Similarly,you could choose to block certain payment methods(usually abused to pay for expensive items that will most likely be returned),such as BNPL.This will force bad-intentioned customers to pay for the product upfront,which will a

215、t least make them think twice.Finally,offering store credit instead of cash refunds will keep many wardrobers off your platform since their end goal is to wear an item without paying for it.Organised fraud ringsFighting organised fraud rings and criminal organisations looking to prey on lax merchant

216、 policies is a long-lasting process that involves deploying high-end anti-fraud solutions and technologies.However,relying solely on AI and ML for automation and identifying fraud might not always catch the bad guys.thus,manual reviews are preferred whenever certain accounts are being flagged.anothe

217、r tip is to look for the reason for ones return and identify patterns that might be associated with fraudulent activities in the long run(lost packages,missing items from order,empty boxes,etc.).at the same time,fraudsters are known for using multiple,connecting accounts to benefit from promotional

218、codes/discounts/free shipping,so due diligence and stricter KYC policies must be implemented.Finally,professional fraudsters spend plenty of time perfecting their attacks and social engineering techniques to identify weak links in the customer service department,including using chatGPt prompts to ma

219、ke their texts and reasons for return more plausible.constantly training your fraud experts and customer care teams will make your brand less vulnerable against organised fraud rings and fraudsters.conclusion Balancing a customer-oriented internal policy regarding returns and refunds while also stay

220、ing ahead of fraudsters is a struggle for most merchants.Forced by the current economic situation or not,most customers are looking into ways to work around refund policies or to receive several perks when shopping online.thus,merchants must ensure they constantly train their fraud teams to detect s

221、uspicious shopping behaviour and prevent fraud at the door.By accurately disseminating between opportunistic fraudsters and those who make a living out of scamming and deploying state-of-the-art technologies fuelled by ML and AI,merchants can prevent refund fraud and minimise their return rates with

222、out impacting their reputation or business.Card-Not-Present(CNP)Fraud35THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025Ecommerces Hidden Foe:the Fight Against Card-Not-Present Fraudcard-not-present(cnP)fraud has been a growing tumour within the digital economy since its inception.this canc

223、er is fuelled by ecommerce growth and the ever-evolving tactics of fraudsters,leading to continuously increasing healthcare costs.according to Juniper Research,online payment fraud has resulted in USD 38 billion in losses for ecommerce merchants in 2023 and is expected to grow by approximately 20%an

224、nually for the foreseeable future.consumers are the ones paying the losses through higher prices for goods and services.to combat this mostly invisible but very real adversary,we must delve into the prevailing trends,potential implications,and management strategies of cnP fraud.impact of cnP fraudcn

225、P fraud encompasses a range of deceptive activities that exploit online transactions.the most prevalent methods include:carding attacks,where fraudsters use automated bots to test large numbers of card numbers to verify their validity.this usually entails obtaining card details from hacked databases

226、 and using them for unauthorised transactions.First-party fraud,when legitimate cardholders make a purchase and then claim that the transaction was unauthorised,resulting in a chargeback.Phishing,social engineering,and account takeovers,during which fraudsters trick individuals into providing their

227、card details by pretending to be legitimate businesses,through deceptive emails and websites,or make purchases using the stored payment information.triangulation,when a fraudster sets up a fake online store,sells goods at attractive prices,and uses stolen card information to buy and ship the goods t

228、o the buyer.All companies are affected by these,including Amazon,eBay,and Eneba.One example of CNP fraud we have observed over recent years is a variation of triangulation fraud.in this scenario,fraudsters skip the creation of a counterfeit store and establish a Telegram channel that advertises purc

229、hasing significantly discounted products(often at half the original cost).Interested buyers contact fraudsters with their desired product details and pay upfront.the fraudsters then complete the purchase on the website using stolen card information,which eventually comes back as a chargeback.this sc

230、heme illustrates the possibility of a collusion between legitimate consumers and the fraudsters,with the former knowingly complicit in the fraudulent transaction.EnebaConsumer trust is the holy grail in digital commerce,and repeated incidents of fraud can erode this trust.Mantas Eitutis is the Head

231、of Payments and Risk at Eneba,responsible for the companys payment strategies,partnerships,risk management,and optimising operational efficiency.Eneba is a fast-growing digital entertainment marketplace with 15 million satisfied buyers in 2023.Its offer includes game keys,gift cards,mobile top-ups,a

232、nd moreMantas Eitutis Head of Payments and Risk Eneba36THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025Fraudsters exploit any vulnerability in online payment systems,and the anonymity of digital transactions makes it easier to perpetrate undetected fraud.For consumers,cnP fraud results in

233、unauthorised charges,loss of funds,and disputing fraudulent transactions.For ecommerce,“The True Cost of Fraud”study by LexisNexis estimated that for every 1 USD of lost value due to fraud,the actual costs are more than three times higher,due to additional costs.Beyond financial losses,CNP fraud can

234、 severely damage a businesss reputation.consumer trust is the holy grail in digital commerce,and repeated incidents of fraud can erode this trust.it is paramount to employ sophisticated fraud prevention measures,which naturally result in increased costs and usually lead to higher prices for goods an

235、d services,making the overall economy suffer.Strategies for managing CNP fraudCompletely eradicating CNP fraud might be impossible without sacrificing privacy or introducing an unbearable amount of friction for customers.However,we can significantly reduce its impact through a multi-layered approach

236、.This involves technology,data analysis,and collaboration.there are numerous fraud prevention tools on the market aiding businesses to protect themselves and their customers.These include 3D-Secure authentication,machine learning(ML),and artificial intelligence(AI)based on behavioural analytics,whic

237、h analyse transaction patterns and detect anomalies indicative of fraud.Real-time fraud detection systems flag suspicious transactions for further review before being processed,reducing the likelihood of successful fraud.Fraudsters constantly develop new tactics,but the adaptive ML allows for ongoin

238、g adjustment of detection methods based on emerging trends.As the volume of ecommerce transactions grows,AI and ML systems can efficiently analyse massive datasets for risks,without sacrificing accuracy and customer experience with redundant security checks.Another notable solution is Dark Web monit

239、oring.This involves continuously scanning dark/deep websites(such as hacker forums)for signs of leaked credentials or exposed infrastructure vulnerabilities.Fraudsters often purchase large volumes of compromised card credentials,known as card dumps,and exploit them on ecommerce websites.the table be

240、low shows the number of deep web mentions of leading ecommerce websites worldwide(February 2024)confirming the attractiveness of the sector for fraudsters.embracing deeper collaboration and information sharing is the next critical step to mitigate fraud.each entity-businesses,banks,law enforcement-h

241、as a piece of the puzzle.Sharing data on fraudulent activities,suspicious actors,and emerging tactics allows for a more comprehensive view of the cnP fraud landscape.By connecting these dots,we can identify fraud rings,track stolen card information across transactions,develop more effective preventa

242、tive measures,and improve ML/AI models faster.In essence,information silos are a fraudsters best friend.Breaking down these barriers through collaboration is crucial for creating a united front against cnP fraud.overall,adopting advanced technological solutions,employing behavioural analytics,and fo

243、stering collaboration are essential for businesses to protect themselves and their customers from CNP fraud.Combining these efforts with proactive customer education and internal training is crucial for maintaining consumer trust and ensuring long-term success and ecommerce security.2850134897273667

244、1665571370351159133101817064050010001500200025003000NUMBER OF DEEP WEB MENTIONSOnline payment fraud has resulted in USD 38 billion in losses for ecommerce merchants in 2023.Merchant Fraud38THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025Ephraim Rinsky is Senior Product Marketing Manager at

245、 Riskified,driving GTM strategy for the companys portfolio solutions.Riskified empowers businesses to unleash ecommerce growth by outsmarting risk.Its AI-powered fraud and risk intelligence platform analyses the individual behind each interaction to provide real-time decisions and robust identity-ba

246、sed insights.Ephraim Rinsky Senior Product Marketing Manager RiskifiedHow can fraud threaten revenue and profit margins?Every 1 USD of fraud costs the merchant 3 USD in the form of chargebacks,chargeback fees,and potential penalties.There are also the costs of lost merchandise,harm to the investors

247、confidence,and other indirect costs,all of which mean that the impact of fraud on margins in any given quarter can be enormous and hard to predict.Compounding the threat to profitability is the fact that ecommerce merchants may over-decline legitimate orders in the name of preventing fraud.and decli

248、ning too many good orders not only costs you in revenue but can also cost you good customers.However,by working with an accountable fraud partner,merchants can reduce the costs of fraud and its impact on revenue and margins.What are the main differences between an accountable fraud partner and a non

249、-accountable fraud vendor?With an accountable partner,clients receive a chargeback guarantee that shifts the costs of fraud chargebacks from the merchant to the fraud partner.The success of the partners business model depends on their ability to accurately differentiate between good and bad customer

250、s,which requires heavy-duty ai and ongoing investment in r&d.a non-accountable fraud vendor,on the other hand,doesnt provide chargeback liability,and their business model incentivises them to underinvest in r&d.they make the same revenue whether they catch half of the fraud or all of it,and it would

251、 even be irresponsible for the ceo of such a vendor to heavily invest in r&d,since it delivers no roi for them.most merchants think that non-accountable platforms cost less because their pre-transaction fees appear lower.However,businesses should consider the cost of chargebacks(and associated costs

252、)they will have to pay with a non-accountable vendor,as well as the disparity in performance,potentially resulting in lower approval rates and revenue.What does an accountable fraud partner look like?An accountable fraud partner takes on financial responsibility ensuring that fraud cant hurt their p

253、artners revenue or profits through three mechanisms.RiskifiedThe Paypers sat down with Ephraim Rinsky,Senior Product Marketing Manager at Riskified,to explore the differences between partnering with an accountable fraud provider versus one that doesnt guarantee results.By working with an accountable

254、 fraud partner,merchants can reduce the costs of fraud and its impact on revenue and margins.39THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025First,an approval rate SLA sets a floor on the share of orders that the partner will approve.For instance,the partner commits to approving 98%of th

255、e merchants orders over the next two years,which allows the cFo to eliminate this variable from revenue forecasts.Second,an accountable fraud partner offers a chargeback guarantee that shifts the costs of chargebacks with a fraud reason code from the merchant to the partner.When the partner approves

256、 an order that is reported as fraud by the cardholder,the partner reimburses the merchant for the chargeback cost.this incentivises the partner to keep chargebacks low and make accurate order decisions.Finally,an accountable partners performance-based fee structure rewards the fraud partner only for

257、 approved transactions and provides a disincentive to over-decline orders.as essential as the chargeback guarantee,this fee setup compels the partner to actively bolster revenues and profitability by maximising valid approvals even beyond what the SLA requires.Combined,these elements keep the partne

258、rs goals fully aligned with the merchants objectives.this arrangement also drives accountable partners to make highly accurate decisions.as a result,the partner is motivated to innovate and invest heavily in data science and risk modelling,allowing the merchant to benefit from the latest technologie

259、s,methodologies,and ai,without making investments to build this technology from scratch.Why should a CFO and other C-suites care about having an accountable fraud partner?minimising risk exposure is a core responsibility of a cFo in any organisation.in ecommerce,the danger of a major fraud attack is

260、 always lurking,creating not only a constant threat of losses but also an ongoing forecasting nightmare an acute concern for public companies.An isolated fraud attack can spiral into a seven-figure event if its not dealt with immediately.Chargebacks and associated costs are a forecasting wildcard,es

261、pecially with legacy anti-fraud strategies.Having an accountable fraud partner eliminates the unpredictability of fraud costs from the forecasting equation and sets a floor on the total order volume the business can approve.the cFo knows exactly what their minimum approval rate will be,as the liabil

262、ity of paying chargebacks belongs to the accountable fraud partner.In fact,the CFO can predict precisely how much this partnership will increase profits and margins.Why is an accountable fraud partner better than one that offers non-guaranteed recommendations?non-accountable vendors that provide non

263、-guaranteed recommendations typically try to steer merchants toward uncovered decisions or scores because its cheaper and safer for them.they have minimal incentive to identify emerging fraud trends quickly since they are not liable.On the flip side,their performance guarantees are meaningless.its t

264、rivial for them to offer an approval rate SLAits easy to approve 100%of orders when you have no liability if you make a mistake.Similarly,their machine learning models tend to be relatively lightweight and serve better to just screen out egregious fraud.On the other hand,an accountable partner will

265、invest extensively in expensive data science architecture,like models that monitor data drift and detect anomalies.Overall,an accountable partner offers clear decisions and guaranteed financial outcomes.A non-accountable vendor offers suggestions and bears no cost for subpar tech.Overall,an accounta

266、ble partner offers clear decisions,and guaranteed financial outcomes.click here for the company profileTrends and Players Shaping the Payments IndustryWho Is Who in Fraud Prevention41THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025the global fraud detection and prevention market reached a

267、value of over USD 42 billion in 2023,and it is projected to continue growing at a CAGR of 23.3%from 2024 to 2032,reaching over USD 277 billion by the end of 2032.In 2023 alone,merchants lost more than USD 48 billion to online fraud,reflecting a 16%increase in ecommerce fraud from 2022.Moreover,a rep

268、ort from Sift reveals that 42%of Gen Z customers are most willing to commit first-party fraud by requesting refunds while keeping the items ordered online.meanwhile,professional fraudsters are using increasingly sophisticated social engineering techniques to exploit merchants vulnerabilities.With te

269、chnological advancements making data access and online payments easier than ever,concerns about online fraud are driving demand for more tailored and complex fraud prevention solutions.Globally,cyberattacks,scams,identity theft,and fraudulent activities have increased in accuracy,aided by tools like

270、 GenAI and LLMs(Language Learning Models).This may prompt companies to add extra layers of friction to ensure they are interacting with real customers.additionally,the current global economic situation has led to an increase in certain types of ecommerce fraud,such as credit card fraud,chargebacks,g

271、ift card fraud,and account takeover.this depicts a challenging scenario for merchants and marketplaces,who must choose the right fraud detection and prevention technologies to minimise risks,without causing increased cart abandonment due to added friction.Fortunately,there are several fraud solution

272、 providers specialising in all market sectors,working together closely to combat fraud globally and share knowledge.in this edition of the Fraud Prevention in Ecommerce Report 20242025,weve compiled data on multiple companies activating across all regions,aiming to offer a comprehensive overview of

273、the key solutions they deploy to deter fraudsters all in the form of an easy-to-follow infographic.the Who Is Who in Fraud Prevention infographic highlights global players tackling various aspects of fraud prevention,as follows:fraud/risk management and decisioning platforms,identity verification,be

274、havioural biometrics,customer authentication,chargebacks management,data provider and intelligence,KYC,KYB/merchant onboarding,bot risk management.they specialise in one or multiple sectors and,by sharing their expertise,these players help merchants conduct their business safely,scale revenues,and p

275、rovide end-users with a secure and seamless online shopping experience.the following overview is the result of in-house desk research,combined with data available on the websites of the featured solution providers.We invite you to explore the infographic weve crafted,hoping that the information enco

276、mpassed helps you gain a strategic advantage in the competitive realm of fraud prevention in ecommerce.Introduction42THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025Fraud/Risk Management and Decisioning PlatformIdentity Verification FRAUD PREVENTIONWHO IS WHO INFighting E conomic Cri me To

277、getherRWHO IS WHO IN FRAUD PREVENTIONresearched by the Paypers,202443THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025Customer AuthenticationBehavioural BiometricsData Provider and IntelligenceFRAUD PREVENTIONWHO IS WHO INResearched by The Paypers,2024RWHO IS WHO IN FRAUD PREVENTIONresearch

278、ed by the Paypers,202444THE PAYPERS|Fraud Prevention in ecommerce rePort 2024-2025Bot Risk ManagementChargebacks ManagementKYB/Merchant OnboardingFRAUD PREVENTIONWHO IS WHO INResearched by The Paypers,2024KYCRWHO IS WHO IN FRAUD PREVENTIONresearched by the Paypers,2024For the latest edition,please c

279、heck the Reports sectionDont Miss the Opportunity of Being Part of Large-Scale Payments Industry OverviewsThe Paypers releases annual reports covering the latest trends,developments,disruptive innovations,and challenges that define the global payments and fintech industry B2B and B2C payments,cross-

280、border ecommerce payments,Embedded Finance,A2A payments,BNPL,consumer preferences,fraud prevention,payments regulation,marketplaces and online platforms,and many others.In these reports,consultants,policy makers,service providers,merchants and marketplaces,banks,and fintechs from all over the world

281、share their views and expertise on key industry topics.Listings and advertorial options are also part of the reports to ensure effective company exposure at a global level.Endorsement partner:Key media partner:Global Overview of Payment Providers 2024Key Players and Trends in B2B/B2C EcommerceInsigh

282、ts into Payments and BeyondGlobal Overview of Payment Providers 2024Insights into Payments and BeyondFintech for Marketplaces and Platforms Report 2024Leveraging the Latest Paytech,Regtech,and Embedded Finance InnovationsSupporting Partners:Key Media Partner:Fintech for Marketplaces and Platforms Re

283、port 2024Insights into Payments and BeyondKey media partners:Supporting partners:Cross-Border Payments and Ecommerce Report 2023-2024Complete Overview of Trends,Developments,and Future PerspectivesInsights into Payments and BeyondUnlocking the Potential of A2A Payments Report 2024Changing the Way We Pay and Get PaidKey Media Partner:Cross-Border Payments and Ecommerce Report 20232024Unlocking the Potential of A2A Payments Report 2024