Your guide to online fraud prevention

Understanding online fraud and reducing your exposure:

Mobile shopping apps have become increasingly popular in recent years, and returning customers often outspend those on desktop browsers. Naturally, that makes apps a potentially lucrative target for fraudsters, who often try to disguise their actions by emulating the behavior and characteristics of legitimate customers. While mobile app purchases made in Europe and other regions are actually less risky than desktop orders, you should still remain vigilant of the potential risk of fraud, and have systems in place to detect it.

The most susceptible products to mobile app fraud are digital goods, like e-vouchers. This is because they’re fulfilled instantly and leave little time for either automatic or manual review. They’re also bought and dispatched digitally, which means fraudsters can sidestep the trickiest part of the transaction: address verification and delivery. The fact that many mobile apps encourage people to create accounts and store payment details also increases the risk of account takeover (ATO) attacks. However, according to a recent Riskified survey,¹ 20% of fashion merchants don’t have any ATO protection measures in place — despite 51% of them admitting that 1 in 10 of their accounts were taken over in the last 12 months.

When ATO goes undetected, it can lead to larger problems such as lost customer lifetime value, high chargeback rates, and damage to the brand’s reputation.

The trend towards mobile transactions grew rapidly during the height of the COVID-19 pandemic — when 4 in every 5 online purchases were made this way. Mobile commerce (mCommerce) is already the standard in Asia, and a third of all digital transactions in Europe occur on a mobile device. However, the mobile payment experience for customers often falls short of desktop — with users having to enter their details into fiddly fields across several pages, via a small keyboard. As part of your online global expansion, you’ll need to fully embrace mobile: as a way for people to browse and pay for your products, integrate social media and, in the longer term, make augmented reality (AR) part of the shopping experience you offer.

In 2020, the percentage of customers using new payment methods compared to last year grew from 23% to 26% quarter-on-quarter. Much of that rise can be attributed to eWallets (like PayPal, Google Pay or Paytm), which increased by 151% between Q1 and Q2 2020 — or 3.5x faster than credit card payments. That makes eWallets an important growth engine for online retailers, particularly in high-end fashion where more than two-thirds of these payments are made by new customers.

In the UK and Germany, eWallets are the preferred payment method for 1 in 4 online shoppers. And research shows that merchants who add eWallets as a payment method see a 14% rise in mobile orders. It’s also worth bearing in mind that, in Europe alone, 20% of shoppers have abandoned their baskets because their preferred payment method wasn’t available.¹

In China, eWallets are already the predominant method of payment — with just 16% of local online transactions made using credit cards. If you’re considering expanding your business there, you’ll need to be mindful of shopper preferences. Likewise, if you’re currently selling only in China and thinking of widening your offering to new markets, you should adopt other CNP (card not present) methods. Be aware though, this will potentially expose you to credit card fraud, chargebacks, and other challenges you may not have faced before. To deal with these, you could consider adopting a localisation strategy, and connecting with either regional business partners or vendors who have the capabilities to facilitate local shopping and payment habits.

As a cross-border retailer, you’ll need to cater to people’s shipping requirements — not only in terms of how much they’re prepared to pay, but also how they ultimately take receipt of their goods. For example, in many parts of Europe, click and collect, or BOPIS (Buy Online, Pick Up In Store) is gaining popularity. Sometimes this service is offered for free, or for less than doorstep delivery.

The pandemic showed how important it is for merchants to be flexible enough to quickly adapt to consumers’ shipping preferences. For example, lockdown naturally made expedited/courier shipping more popular than BOPIS. Data from eCommerce specialist, Riskified, also reveals that expedited shipping is now standard for more than 40% of high-end fashion online orders. Third-party drop-off points also grew in popularity during the pandemic, as a way for customers to bypass lengthy doorstep delivery times. And, of course, shipping costs are a major consideration for any online retailer. In fact, 40% of European online shoppers say they’ve abandoned a purchase because the shipping cost was too high.

eCommerce has become a lifeline for many retailers affected by the pandemic. However, it has demonstrated the need for merchants to implement automated solutions that adapt to unforeseen circumstances, mitigate the risk of card not present (CNP) fraud, and rely less on staff to handle high order volumes.

For example, during the pandemic, customers new to online shopping made smaller but more frequent purchases — while returning customers spent more. Social isolation and changing work patterns also caused many people to shop at different times of the day. Before the virus, most orders were placed between 6pm and midnight — whereas during the first few months of the crisis, consumers started shopping more during work hours (12pm-6pm). Ordinarily, this kind of unusual customer behaviour could have raised a red flag for rule-based fraud prevention systems conditioned to pre-Coronavirus shopping habits. As a result, this may well have resulted in lost sales and delayed expansion plans.

Looking ahead, merchants need adaptable solutions that maximise operational efficiency, reduce time spent on outdated processes — and enable them to focus on finding new global customers. For more articles and guides on taking your business global, head over to the Market Finder website.