For the second year in a row, merchants reported increases across all seven key performance indicators (KPIs) that measure payment fraud's impact on eCommerce businesses, according to the 2022 Global Fraud & Payments Report conducted by Cybersource, in collaboration with The Merchant Risk Council (MRC) and Verifi.1 These KPIs include more revenue being lost to fraud, more eCommerce orders being rejected as fraudulent and more orders leading to chargebacks and disputes.2
While the nature of fraud-related challenges stayed fairly consistent over the past year, the severity each challenge presents to merchants has increased.3 In particular, identifying and responding to emerging fraud attacks, updating fraud risk models and effectively managing fraud while expanding into new sales channels have become markedly more difficult for merchants to overcome.4
Merchants are reprioritizing
Despite rising fraud KPIs and revenue losses over the past year, merchants generally continue to spend the same on fraud management—about 10 percent of ecommerce revenue—as they did the previous year.5
With budgets that are not rising as quickly as fraud attempts, merchants of all sizes have instead reprioritized their fraud management strategies. More merchants now prioritize reducing fraud and chargebacks as their primary imperative, versus optimizing the customer experience, which was the main goal for most in 2021.6 Here is where they're focusing:
Pushing preferred payments - While most eCommerce merchants now accept a variety of payments, the vast majority (nearly 9 in 10) encourage customers to pay via preferred methods, mainly to minimize the risk of payment fraud.7
Minimizing manual review - When it comes to the role of manual order review in merchant fraud management strategies, 60 percent seek to reduce their reliance on this process or eliminate it entirely.8
Reducing first-party misuse – "Friendly fraud" has risen to be one of the most attempted types of fraud attacks. 9 With the wide variety of friendly fraud, it can be tough for merchants to identify what's real, what's being miscategorized and what is actual fraud. It's more important than before for them to focus on account-level protection.
Staying ahead of regulations and mandates – More merchants now feel prepared for PSD2 mandates with 3DS technology and are finding it less difficult to overcome the challenges of staying up to date on payment regulations and payment partner rule changes.10
Employing multiple fraud management tools - Most merchants currently use an average of four different tools and services to detect and thwart fraud attacks—and plan to add more.11 Many of the most widely used tools today are also considered the most effective at detecting and preventing fraud, but merchants can improve their fraud prevention toolkits by adding less widely used, but still highly effective, tools and tactics such as company-specific fraud scoring models, biometric indicators and multi-merchant / order velocity monitoring.12
Find the right fraud-management partner
Today's eCommerce landscape poses difficult challenges for merchants, who are doing their best to reduce fraud with limited budgets. However, they are increasingly doing so at the expense of the customer experience. Working with a partner like Cybersource that employs a robust fraud management engine with sophisticated data models will help merchants strike a balance between mitigating fraud attacks while maintaining a positive customer experience.