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11/22/2016

Study predicts big fraud increase during holidays

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Cyber-criminals will be up to no good this holiday season, and they are using the Europay, Mastercard, Visa (EMV) shift as their way in.



The EMV mandate may be adding a layer of protection at store-level, however, it is increasing card-not-present (CNP) fraud for digital retailers. In fact, global retailers can expect 12% growth in online fraudulent activity in the upcoming holiday season, compared with the same period last year.



These are among the findings of a report by ACI Worldwide. The study was based on information from 125 retailers that have been using ACI services for the last two years, and the “hundreds of millions of transactions” they have processed between Jan. 1-Oct. 31, 2015, and Jan. 1-Oct. 31, 2016.



As EMV protects card transactions at store-level through encryption, fraud-sters are shifting their focus to online sources, CNP fraud attempt rates in the United States are expected to increase by 43%, the study found.



“Fraud is increasing at a rate nearly equal to general retail growth globally — and is exponentially increasing in the U.S., due to a seismic shift from in-store to online activity,” said Mike Braatz, chief product officer, ACI Worldwide. “And because fraudulent activity is now considered to be an everyday occur-rence, consumers and merchants must take every precaution as we head into peak holiday shopping season.”



In the U.S., attempted fraud average ticket value (ATV), or a retailer’s average size of individual sales by credit card, is expected to decline from $239 to $219, an 8% decrease. Alternative shipping methods, such as buy online/pick-up in-store (BOPIS), low-priced electronics and promotions could be spurring this slight decline, the study reported.



However, retailers must stay on their game. The expected peak fraud attempt day will be Christmas Eve, with nearly 2.5% fraud, due to the popularity of gift cards and last-minute shopping via buy online-pick up in-store. However, that doesn’t mean brands are out of the woods on Cyber Monday or Black Friday. Specifically, Cyber Monday will have the highest processing volumes of any day of the year — followed closely by Black Friday, the study said.



“Merchants need to understand their peak days and the sales that drive those high velocity times to ensure risk strategies are effective and efficient,” said Braatz. “It’s important to prioritize real-time fraud detection without alienating the consumer experience.”