Online payment fraud losses from e-Commerce, airline ticketing, money transfer, and banking services are set to reach $48 billion by 2023, more than double $22 billion in losses projected for 2018.
This is one of the key findings of a new report from Juniper Research into the online payment fraud segment.
Juniper claimed that a critical driver behind these losses will be the continued high level of data breaches resulting in the theft of sensitive personal information.
The Juniper whitepaper, Future Fraud ~ 3 Dynamics Changing Fraud in 2019, noted that fraudulent activities are directly linked to e-commerce and other activities that involved online payment. Juniper says fraudsters are actually the first to exploit new systems for their own benefits.
Drawing from ACI Worldwide data that maps e-commerce growth against fraud attempt growth, the data shows that fraudulent activity is actually outpacing the growth of overall e-commerce transactions. This suggests that fraudsters are attempting to leverage peak shopping periods as a means to obscure their activity. Such a high volume of transactions running through merchant systems leaves little or no time for manual reviews unless merchants are willing to accept lost revenue.
Identity theft is also on the rise stemming from the combination of a proliferation of digital services, rising cases of spear phishing and data breaches.
Rise of synthetic identity
Juniper claimed that fraudsters are using information gleaned from these breaches to move away from pure identity theft, instead using fragments of real data to create new, synthetic identities.
With the global rise in instant payment schemes and a focus on transactional rather than behavioral risk, Juniper forecasts that money transfer would be particularly vulnerable, with fraud losses increasing by over 20% per annum 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 behavioral 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.
Stopping the losses
Juniper predicted that techniques practised by the Magecart and Fin7 groups would become more common as fraudsters seek to create products from their knowledge. The groups used a combination of malware and cross-channel approaches for criminal gain. The research noted, as a result, more complex fraud would only become more common as, in effect, a ‘fraud-as-a-service’ economy emerges.
The report recommended a holistic approach to fraud prevention. The procurement of omni-channel fraud prevention services and a strategy to assess and mitigate risk from a cybersecurity perspective will be critical for effective fraud prevention in the near to medium-term.
First published in Fintech Innovation