Online marketplaces are now considered to be a “prime” target for fraudsters, according to an extensive report shared by Juniper Research.
Juniper Research explained that this is because there are different ways of gaining access to sensitive information that is stored online for digital commerce purposes.
Juniper Research added in its detailed report that since the COVID-19 pandemic, the eCommerce market has grown steadily, as businesses have adapted to ways of selling.
According to the research study released by the Juniper Research team, this enables fraudsters to take advantage of more opportunities to carry out merchant fraud and of any loopholes or weaknesses they can find.
The update from Juniper Research also mentioned that fraud detection and prevention measures are critical to merchants across industries, since they represent ways of preventing unnecessary revenue loss via issues such as chargebacks and order reprocessing.
As stated in the research report, it is pivotal that antifraud measures evolve over time, as fraudsters are always changing the tactics they use to manoeuvre around current measures.
As explained in the Juniper Research update, for merchants and businesses, fraud detection and prevention refers to the merchant’s ability to monitor all transactions and payments that the business takes effectively and safely; identifying any suspicious activity quickly and taking appropriate action.
Juniper Research defines merchant fraud prevention, also referred to as merchant fraud detection and prevention, as: ‘The use of a number of anti-fraud solutions and technologies, including AI, ML, and behavioral analytics in order to help merchants and businesses reduce their current fraud rates and the costs of expenses induced by fraudulent activity.’
The report from Juniper Research explained further that the different types of fraud and the ways in which they are executed are constantly evolving to exploit weaknesses in a merchant’s fraud detection and prevention efforts.
The following section highlights the different types of fraud and how they
affect merchants.
First-party fraud against a merchant is where a consumer knowingly defrauds a merchant for their own personal gain; receiving goods or services which they have not paid for themselves.
A consumer can also operate its fraudulent activity from inside a business; making it more difficult for merchants and financial institutions to detect and prevent it, since the activity originates from legitimate customers.
As stated in the research report, first-party fraud can be committed in a number of ways, including chargeback, policy abuse, and family fraud.
The value of eCommerce fraud is set to increase from $44.3 billion in 2024 to $107 billion in 2029; a massive growth of 141%.
- AI is fueling the sophistication of attacks across the eCommerce ecosystem, with the use of deepfakes created using AI to defeat verification systems being a key threat. This threat, combined with rising levels of ‘friendly fraud’, where fraud is committed by the customer themselves, such as refund fraud, is increasingly threatening merchant profitability.
- AI is enabling fraudsters to remain ahead of security measures and commit sophisticated attacks on a greater scale. AI is enabling fraudsters to create credible messages and synthetic identities at scale; creating high-quality attacks with greater frequency. These technologies are also highly scalable; empowering fraudsters to heavily automate their attacks and overwhelm rules-based prevention systems.
• eCommerce merchants must seek to integrate fraud prevention systems that offer AI capabilities to quickly identify emerging tactics. This will prove especially important in developed markets, where larger merchants are at higher risk of being targeted for fraud, such as testing stolen credit cards. - Merchants are employing these same technologies in order to recognise emerging fraud patterns and react in real-time. Merchants must work to incorporate biometric identification into checkout processes to further secure transactions. By using methods such as liveness detection, merchants will be able to protect their businesses and customers from increasingly sophisticated AI deepfake fraud attempts.