WHY E-COMMERCE FRAUD IS COSTING MERCHANTS MORE THAN THEY THINK The financial hit from fraud goes well beyond chargebacks, which is why a growing e-conomy needs advanced machine learning technology to balance security and sales, says Vesta Globally, we are seeing a seismic shift in consumer shopping behaviour, largely as a result of the pandemic. In Asia Pacific alone, businesses receiving online orders recorded 37.6 per cent growth in 2020, and that is expected to nearly double to reach US $2trillion by 2025. Particularly in the mobile-first Southeast Asia, traffic for online shopping platforms increased by leaps and bounds last year. Singapore led the trend with a surge of 35 per cent compared to 2019, followed by the Philippines (21 per cent), Vietnam (19 per cent), Malaysia (17 per cent), Thailand (15 per cent) and Indonesia (six per cent). Social commerce through Whatsapp, Instagram and Viber in countries such as Indonesia and the Philippines also saw a surge. The gross merchandise value from e-commerce increased by 63 per cent and
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propelled spending in the region to US $62billion last year, with a projected value of US $172billion by 2025. Merchants are coming online to meet this rising demand. But, as quickly as consumers race to adopt mobile wallets and merchants race to accept mobile transactions, hackers race to attack the weakest links. Merchants who do not have a line of defence in place to stop mobile payment criminals, due to the speed with which they pivot online, face vulnerabilities in problem areas such as payment fraud. That’s particularly the case in Southeast Asia, where the rate of attempted fraud is up to 12 times greater than the global average. Online merchants here lose an average 1.6 per cent of revenue to direct fraud each year.
Businesses tend to focus on the financial hit from fraud chargebacks, and rightly so. But, sadly, that is not where it ends. In fact, most merchants do not have a fraud problem; they have a revenue problem. Fraud loss and revenue loss are like two opposing weights on a scale – when fraud loss goes down, revenue loss goes up. It can happen when businesses implement stringent safeguards that result in legitimate transactions being rejected – also known as a false decline. Having a valid purchase rejected results in abandoned shopping carts due to checkout friction. Moreover, the spectrum of fraud techniques constantly grows. Alongside the surge in online shopping, for example, has been a growing trend in ‘friendly fraud’. A form of chargeback fraud, it www.thepower50.com