In 2020, identity fraud accounted for over $56 billion for businesses and consumers. As a result, fraud prevention has become a big priority for businesses because cybercriminals continue to find ways to circumvent security systems.
Consumers are victims of identity theft. Businesses are also identity fraud targets by fraudsters who use their identities to apply for credit cards, take out loans, withdraw funds from bank accounts and steal users’ personal information and proprietary business data.
According to a study released by Juniper Research, eCommerce merchants will lose around $20 billion in 2021 due to criminal activity, an 18% increase over the $17.5 billion lost in 2020, mainly due to credit card and friendly fraud.
Credit Card Fraud
As online shopping has increased in popularity, credit card or card-not-present (CNP) fraud has also increased. When sales transactions are completed online or over the phone, it is harder to detect and prevent credit card fraud than when dealing with customers in person. Associates cannot examine credit cards for fraud signs such as a modified account number or a missing hologram as they can during an in-store sale.
“Friendly fraud” is another big concern for businesses. This type of fraud happens when a customer makes a transaction but reports that it was unauthorized. Friendly fraud has increased significantly over the past three years, and it is the biggest concern cited by retailers who are worried about fraud prevention and management.
Both credit card and friendly fraud are causing an increase in chargebacks. In a recent survey, merchants reported seeing a 25% increase in chargebacks during 2021, and industry experts predict that business losses will exceed $30 billion, the total amount of chargeback losses in 2020.
Chargebacks were developed during the 1970s to protect consumers from dishonest merchants and credit card charges using stolen cards. Since the system favors customers over merchants, fraudsters have found ways to use it to their advantage. While many chargebacks are legitimate, around 35% of businesses say they have difficulty detecting and contesting illegitimate claims.
During the first half of 2021, online fraud attempts were 25% higher than those in the same period in 2020. This increase in fraud means there is no better time to consider a comprehensive identity fraud prevention system.
Request a consultation with the experts at Command Credit to get help with fraud prevention and chargeback management.