Online payment fraud losses could more than double in the next five years, reaching $48 billion by 2023, according to a study by Juniper Research. Data breaches and the theft of personal data are set to drive the huge increase in losses from e-commerce, airline ticketing, money transfer and banking services, which are projected to reach $22 billion this year.
The report, Online Payment Fraud: Emerging Threats, Segment Analysis & Market Forecasts 2018-2023, discusses the fraudulent technique of creating synthetic identities using fragments of real data – a phenomenon that is slightly different to identity theft. And the report also predicts that money transfers will become increasingly vulnerable to fraud, forecasting that fraud losses from money transfer will increase by over 20 per cent a year to $10 billion in 2023. “Synthetic identity is currently the low-hanging fruit because, even though it takes time for fraudsters to establish, many of their targets are not set up to detect the behavioural giveaways that indicate this type of fraud. Fraud management providers have solutions on the market to combat this, but the industry as a whole is playing catch-up,” noted research author Steffen Sorrell.
Overall, the report says that fraud is becoming more complex, with criminals using multi-channel approaches, such as a combination of malware and other cross-channel approaches. It also noted the emergence of 'fraud-as-a-service'. To protect against this risk, businesses really have to take an omnichannel approach to fraud prevention.
3 key dynamics that will change fraud in 2019
A white paper by Juniper Research – Future Fraud: 3 Dynamics Changing Fraud in 2019 – notes three of the key dynamics that will change fraud in 2019:
1. PSD2 (the revised Payment Services Directive);
The Strong Customer Authentication (SCA) framework will be applicable from September 2019. However, exemptions set out in the regulatory technical standards (RTS) allow payment service providers to bypass SCA if the associated risk is deemed to be low. The Juniper report states: “Following confirmation of SCA exemptions defined in the RTS, the incentive is quite clear: PSPs that are able to demonstrate a low fraud rate will be able to provide the most seamless experience for the consumer.”
2. Real-time payments
Real-time payments are being implemented in markets globally but, when the UK launched its Faster Payments system in 2008, fraud increased by 132 per cent because service providers were unprepared. The Juniper report says: “The real-time nature of instant payments will require the implementation of real-time fraud protection. Any move from a batch-based transfer scheme to one that handles individual transactions will inevitably require investment to prevent new fraud from occurring.”
3. 3-D Secure 2.0
3-D Secure is an authentication protocol that gives an added security layer to online and card-not-present (CNP) transactions, used by the main credit card issuers Visa, MasterCard, American Express and JCB International (such as Visa's Verified by Visa scheme, Mastercard's SecureCode and JCB's J/Secure). The revised version of this protocol should address some of the security issues that were present in the first version. Juniper says that “when implemented in key eCommerce markets such as the US, [this] should have a dramatic effect in terms of fraud rates”.
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