It’s not hard to tell that over the past few years, internet retail has forever changed the consumer landscape.
Amazon has become one of the largest companies in the world, and recently reached a trillion dollar market capitalization.
Its founder and CEO, Jeff Bezos, is the richest man in the world, and consumers are now able to order goods that end up at their doorstep through pushing a button on their phone.
This certainly hasn’t been easy on the traditional brick-and-mortar retail sector, and thousands of retail stores will be closing this year.
Of course, just because technology has made it easier than ever for the consumer doesn’t mean that criminals haven’t evolved with technology.
While fraud has the obvious implications in terms of financial loss, it damages retailers in other ways as well.
For example, it can put strain on customer service teams, hinder the ability to scale and also lead to overall brand reputation damage.
IntSights and Riskified have released the Retail and Ecommerce Threat Landscape Report, which has illuminated the various ways that fraud can affect internet commerce.
First and foremost—internet retail fraud isn’t limited to one demographic.
This isn’t about one lone teenage student who gets stolen credit card data to order a video game, and it isn’t about an organized crime ring that brings in millions—it’s about both of them.
The fact is that internet retail fraud is simply about obtaining data, using it and scaling the operation without getting caught.
Second, many retailers aren’t prepared. While they might be aware of the cybersecurity threat overall, it might not “hit home” for them.
Business owners might be more concerned with growing their online presence and obtaining a loyal consumer base rather than thinking about fraud and how it can affect their company.
They might be worried more about growing their business rather than dealing with the way that criminals can defraud them.
This makes sense, of course—executives and management are supposed to be concerned about profit margins and productivity.
However, for the advanced criminal or group of criminals—this might leave the retailer a prime target in terms of trying out new methods, tactics and approaches.
Unpacking the Statistics
One of the most important takeaways from the report is this: Riskified has found that in 2018, ecommerce merchants will pay around $42 billion in chargebacks.
Obviously, that’s a stunning number. Of course, retailers often have some tools in place to prevent fraud. Interestingly enough, the declined purchases that result because of these tools will cause a staggering $165 billion.
This means that for every $1 spent to prevent fraud, the retailer actually will lose out on $4 of a potential purchase.
All of the money spent on reaching the consumer, educating the consumer and marketing a product is lost because the order was unnecessarily declined.
Of course, technology is constantly evolving, and ideally technology will evolve so that orders are approved when they should be.
However, this statistic certainly points to how damaging fraud can be with regards to internet commerce.
For those who are wondering about how internet fraud statistics compare around the world, Brazil and Mexico lead the world in terms of ecommerce fraud.
Also, it appears as though the least amount of internet commerce fraud occurs in several European countries, with Italy, Spain, Russia, the U.K. and France considered the “safest nations”—in that order.
The targets are based mainly on the secondary market, which shouldn’t be surprising.
After all, criminals make money through fraud by obtaining these goods with fraudulent financial information, but then only profit when they are able to safely resell these goods without law enforcement intervention.
Unsurprisingly, digital goods lead the list over physical goods, since they can be distributed more discreetly—with tickets and gift cards being the clear leaders when it comes to cyber fraud.
The automotive sector, food sector and jewelry/watch sector are the “safest” sectors with regards to cyber fraud, as well.
Insights & Predictions for the Future
The report is a comprehensive one, going into detail about the different kinds of cyberattacks that exist, and why criminals might utilize one method more than another.
The report also describes how for many criminals, cyber fraud is completely worth it from a risk/reward ratio, as IP addresses can be masked and there are so many cyberattacks that law enforcement often cannot keep up.
It ends with predictions for 2019 regarding the ecommerce sector, which will undoubtedly grow even larger, as the world’s largest online event, Singles Day, just broke a new record.
It points out that retailers should not only be aware of the omnipresent threat of cybercriminals, but find solutions that are scalable, and also seek to monitor threats proactively.
Riskified is a company that focuses on how to improve global ecommerce for its clients and utilizes machine learning algorithms to recognize the quality of orders in order to reduce overall chargebacks.
IntSights is a company that plans to revolutionize cybersecurity by automating security operations more than ever and is one of the fastest-growing companies in the sector.
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