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Veterans of the e-commerce, risk-control and payment card industries all have been predicting that fraudsters will turn their attention to card-not-present channels as the U.S. shifts to EMV chip card payments and thus makes counterfeiting at the point of sale harder to commit. Now a new study by ACI Worldwide Inc. shows that attempted online fraud is indeed increasing dramatically.
Naples, Fla.-based ACI, a payments-software firm, says online fraud attempts measured against payment volume are up 30% this year as consumers use more devices to shop on the Web and card issuers are more cautious about closing accounts. In addition, one out of 86 card-not-present transactions in 2015 is a fraud attempt compared with one out of 114 transactions in 2014, an increase of 33%.
ACI obtained its results by analyzing “hundreds of millions of transactions from large global retailers” from January to July of this year and comparing them with data from the same period in 2014, according to an ACI news release. The data came from retailers using the ReD Shield risk-control service from ACI’s Retail Decisions subsidiary. The study involved fewer than 50 retailers and an undisclosed number of transactions.
“When it comes to fraud, 2015 is likely among the riskiest season[s] retailers have ever seen, and it is critical that they prepare for a significant uptick in fraud, particularly within e-commerce channels,” Mike Braatz, senior vice president of payments risk management at ACI Worldwide, said in a statement. “Our findings suggest that merchants must be even more vigilant and shore up e-commerce fraud protocols, which may leave online shoppers more vulnerable.”
The average fraudulent credit card sale this year is $273, down $9 from $282 in 2014. ACI attributed the decrease to lower shipping costs and lower goods costs, partly as a result of higher coupon use.
Fraud attempts vary widely based on the type of e-commerce transaction. Digital downloads—virtual gift cards or “e-gifting”—have the highest attempted fraud rates at 9.55%, according to the study. Next are next-day or overnight delivery, 6.57%; international sales, 2.38%; and buy online/pick up in store sales at 2.15%.
ACI predicts that buy online/pick up in store fraud attempts will increase 28% this holiday season because of the rollout of EMV in brick-and-mortar stores.
“Retailers do not require consumers to re-run cards when they pick up products in store, making this an attractive option for fraudsters,” the company said.
