Digital Transactions Authoritative, insightful and timely information for payments professionals
By Kevin Woodward
@DTPaymentNews
E-commerce fraud, the bane of online retailers and payments providers, is not only on the rise, certain U.S. locations seem more prone to this deceit than others. That’s according to a recent report from Experian plc.
Data-specialist Experian says the riskiest ZIP code for shipping-address fraud is Eudora, Kan., a small town of 6,211 residents nestled between Lawrence, Kan., and Kansas City, Kan., with the 66025 ZIP code. Experian analyzed the top 25 ZIP codes for e-commerce fraud by billing and shipping addresses. The riskiest ZIP code for billing fraud is Houston’s 77036. Eudora is second in billing fraud.
Experian says it analyzed millions of e-commerce transactions from the first six months of the year to arrive at its findings. Fraud-attack rates are calculated using bad transactions in relation to the total number of transactions. Billing-fraud rates are associated with the address of the purchased, typically fraud victims, Experian says. Shipping-fraud rates are connected to addresses where purchased goods are sent.
E-commerce fraud attacks appear to be 16% higher than for the same period in 2015, Experian says, suggesting that e-commerce fraud is increasing.
What’s going on in Eudora appears to be the work of a small ring of bad actors, Mike Gross, fraud and identity director of risk strategy at Experian, tells Digital Transactions News. It could be reshipping or freight-forwarding fraud, he says. Reshipping fraud is when criminals buy high-value merchandise via the Internet using stolen credit cards and have it shipped to U.S. addresses where an individual will reship the item, usually to an international location. Freight-forwarding fraud is when the item is shipping to a freight forwarder for shipment outside of the United States.
Miami, an international shipping hub, is right behind Eudora with 11 ZIP codes on the Experian shipping-fraud list. Miami ZIP codes also account for 10 spots on the billing-fraud list.
“The city as a whole, if you exclude one or two addresses, is fairly normal,” Gross says of Eudora. Indeed, locations in Florida, California, and New York account for 44% of e-commerce billing fraud, Experian says.
“New York, New Jersey, Houston, are big port cities or major international airports,” Gross says. Often, deliveries to these locations end up with somebody putting them on a ship or plane to be sent overseas, he says.
One effort that may put a squeeze some of this e-commerce fraud is the coming debut of 3D Secure 2.0, expected in the fourth quarter. This authentication technology aims to reduce online fraud. The technology, under development by EMVCo, a payments-technology standards body, will help, Gross says.
Unlike the current version, 3D Secure 2.0 will be designed to work in apps and in browsers, and will be mobile-friendly.
What also will help is merchants urging consumers to use their mobile phones to submit orders and getting them to use apps on their smart phones, Gross says. “The more traffic [merchants] can push into these online channels the better they are at recognizing fraud and finding their best customers.”
