Ecommerce and fraud to rise in the Single Digital Economy
EU unveils plans to promote cross-border trade but merchants fail to recognise the risks
Dublin, Ireland, 13 May 2015 Global Risk Technologies, a leading technology company specialising in chargeback compliance, today urges caution among online merchants following recent plans unveiled by the European Commission (EC) that aim to increase EU member states’ economies by £308bn a year.
The EC has launched 16 proposals, to be implemented by the end of 2016, aiming to eliminate barriers to online trade and help stimulate ecommerce across the continent. But Monica Eaton-Cardone, CIO of Global Risk Technologies, has warned that the changes, if implemented successfully as planned by the end of next year, could expose merchants to fraud and chargeback risks that they are not prepared for handling in higher volumes.
“Online shopping is growing fast in Europe and the new EC proposals should encourage this to continue,” said Eaton-Cordone. “We believe the EU’s new proposals will positively affect European online merchants in the long run, but it’s important the industry recognises the risks that come with vastly increased online trade.”
In the UK alone last year, card-not-present fraud topped £330 million. CNP fraud is also affecting a higher number of transactions, affecting over one million in 2014. If the US rollout of EMV follows the trend of other countries and drives more fraudsters online, the risk for online merchants will rise again. However, it’s not just criminal fraudsters that pose a risk to businesses.
“As more people complete purchases online, we can expect friendly fraud to continue its worrying growth,” adds Eaton-Cardone. “This occurs when ‘typical’ consumers file a chargeback for something they have received. It could be a deliberate fraudulent act or simply an unauthorised transaction from a family member.”
“The problem is that most merchants don’t challenge this and people are getting away with it. 86% of chargebacks are fraudulently placed and 40% of consumers who file a fraudulent chargeback will do it again within 60 days. It’s not a problem that’s going away soon unless merchants fight to stop losing revenue.”
If online retailers answer in the positive to the below questions then they could be winning chargebacks instead of writing off vital funds as just a ‘cost of doing business’.
- Were the goods or services delivered to the customer and sold as advertised?
- Was the order processed securely and properly verified?
- Did the customer fail to contact the seller before initiating a dispute?
- Does a risk-reporting analysis reveal characteristics of friendly fraud?
- Combining technology with human analysis and interaction, can help provide simple, cost-effective and dynamic risk management that helps prepare merchants for the booming world of ecommerce ahead of them.