Executive Briefings

Nearly $26Bn in Fraudulent Online Transactions Expected by 2020, Study Finds

The value of online fraudulent transactions is expected to reach $25.6bn by 2020, up from $10.7bn last year. This means that by the end of the decade, $4 in every $1,000 of online payments will be fraudulent, according to a study from Juniper Research.

Nearly $26Bn in Fraudulent Online Transactions Expected by 2020, Study Finds

Entitled “Online Payment Fraud: Key Vertical Strategies & Management 2016-2020”, the study found that the implementation of CHIP and PIN services at point-of -sale locations in the U.S. is likely to be a key factor driving activity in the online fraud space. It argued that the greater security afforded by CHIP and PIN would persuade fraudsters to switch their attention from the in-store environment to the CNP (card not present) space.

The three hot areas for online fraud include e-commerce (65 percent of fraud by value in 2020 - $16.6bn), banking (27 percent - $6.9bn) and airline ticketing (6 percent - $1.5bn).

The study also claimed that e-retail would be particularly susceptible to online fraud, with the value of fraud in this sector increasing at twice that of banking and seven times that of airline ticketing. The research highlighted two key areas for fraud within e-retail: “buy-online, pay in-store” and electronic gift cards.

It argued that the continuing migration to online and mobile shopping, of both digital and physical goods [reaching over $1.7tr in 2015] will provide a further incentive for fraudsters to focus their attention on these channels.

Countermeasures

Meanwhile, the research claimed that although banks are able to counter online banking fraud by deploying new technologies such as 3D-Secure and device fingerprinting, these measures often only provide temporary respite as fraudsters quickly find new ways to defraud.

Similarly, while extensive efforts by the airline industry to deploy sophisticated fraud detection and prevention systems has reduced fraud significantly for some major airlines, this industry has also seen fraudsters shift their focus to other perceived weak spots in the system.

“A few larger airlines claim that they have reduced e-ticket sales fraud to less than 0.1 percent or 10 basis points of revenues,” said research author Gareth Owen. “When thwarted, however, fraudsters quickly move on to easier pickings such as frequent flyer fraud, for example.”

Source: Juniper Research

Entitled “Online Payment Fraud: Key Vertical Strategies & Management 2016-2020”, the study found that the implementation of CHIP and PIN services at point-of -sale locations in the U.S. is likely to be a key factor driving activity in the online fraud space. It argued that the greater security afforded by CHIP and PIN would persuade fraudsters to switch their attention from the in-store environment to the CNP (card not present) space.

The three hot areas for online fraud include e-commerce (65 percent of fraud by value in 2020 - $16.6bn), banking (27 percent - $6.9bn) and airline ticketing (6 percent - $1.5bn).

The study also claimed that e-retail would be particularly susceptible to online fraud, with the value of fraud in this sector increasing at twice that of banking and seven times that of airline ticketing. The research highlighted two key areas for fraud within e-retail: “buy-online, pay in-store” and electronic gift cards.

It argued that the continuing migration to online and mobile shopping, of both digital and physical goods [reaching over $1.7tr in 2015] will provide a further incentive for fraudsters to focus their attention on these channels.

Countermeasures

Meanwhile, the research claimed that although banks are able to counter online banking fraud by deploying new technologies such as 3D-Secure and device fingerprinting, these measures often only provide temporary respite as fraudsters quickly find new ways to defraud.

Similarly, while extensive efforts by the airline industry to deploy sophisticated fraud detection and prevention systems has reduced fraud significantly for some major airlines, this industry has also seen fraudsters shift their focus to other perceived weak spots in the system.

“A few larger airlines claim that they have reduced e-ticket sales fraud to less than 0.1 percent or 10 basis points of revenues,” said research author Gareth Owen. “When thwarted, however, fraudsters quickly move on to easier pickings such as frequent flyer fraud, for example.”

Source: Juniper Research

Nearly $26Bn in Fraudulent Online Transactions Expected by 2020, Study Finds