Pandemic driving global e-commerce growth, but fraud is on the increase too

The COVID-19 crisis is driving the global growth of e-commerce sales, with millions of consumers worldwide in quarantine shopping for goods, services and entertainment online.

Transaction volumes in most retail sectors have seen a 74 percent rise in March compared to the same period last year, while online gaming has seen a staggering increase of 97 percent, according to analysis by ACI Worldwide of hundreds of millions of transactions from global online retailers.

“During these unprecedented and uncertain times with millions now at home, many consumers are going online to purchase products or services,” said Debbie Guerra, executive vice president, ACI Worldwide.

“Quarantine has changed lives for all of us, with consumers buying electronics and furniture—to support work, communication, school and entertainment—as well as items such as home goods and DIY products.”

However, fraud is on the increase too, the research shows, as fraudsters are using the surge in online activity to target unsuspecting consumers and merchants.

Merchants are starting to experience dramatic increases in COVID-19-related phishing activities, with stolen credentials released into the e-commerce payments chain, as well as increased friendly fraud activities.

“Fraudulent attempts are on the rise, and consumers must be vigilant as fraudsters are using the current situation to obtain and use their financial data and information,” continued Guerra.

Key findings

Online retailer sectors with rising transaction volumes in March 2020 compared to the previous year include:

• Home products and furnishings: +97 percent, DIY products: +136 percent, Garden essentials: +163 percent, Electronics: +26.6 percent, Telco: +18.6 percent

Online retail sectors with declining transaction volumes in the same period:

• Ticketing: -60 percent, Travel: -44 percent, Online dating: -8.9 percent

Fraud trends

• Average fraudulent attempted purchase value increased by $36 in March, driven by electronic and retail goods; this corresponds to a fraudulent attempted transactional value increase by 13 percent.
• Fraudulent attempted transactional volume decreased by 8 percent, driven by increase of fraudulent attempt purchase value.

“Long term, we and others in the industry predict that the shift in consumer behavior—opting for online purchases—is likely to outlast the crisis,” concluded Guerra.

“The industry is well ahead of the curve in adapting payment methods and ways to combat fraud in response to the changing behaviors and expectations of consumers, which are now being expedited by the lockdown.”

Tips for consumers to protect identity and personal information

• Beware of online requests for personal information. Coronavirus-themed emails seeking personal information are likely to be phishing scams. Legitimate government agencies won’t ask for that information. Delete the email.
• Check the email address or link. Inspect a link by hovering the mouse button over the URL to see where it leads. Sometimes, it’s obvious the web address is not legitimate. But keep in mind phishers can create links that closely resemble legitimate addresses. Delete the email.
• Watch for spelling and grammatical mistakes. If an email includes spelling, punctuation and grammar errors, it’s likely a sign of a phishing email. Delete the email.
• Look for generic greetings. Phishing emails are unlikely to use a person’s name. Greetings like “Dear sir or madam” often signal an email is not legitimate.
• Avoid emails that insist acting now. Phishing emails often try to create a sense of urgency or demand immediate action. Delete the email.

Tips for merchants to maintain security and deliver to customers

Maintain security and deliver a great customer experience, as consumer purchasing behavior—both genuine and fraudulent—has changed.

• For example: Express shipment and Buy-Online Pickup In-Store delivery methods in the last two weeks have tripled, making transaction decision speed and accuracy critical.
• Use customer profiling and time-on-file techniques to maintain the customer experience for valued customers and ensure good transactions are still accepted.

Expect an increase in friendly fraud chargebacks as a result of growing financial difficulties among consumers. Friendly fraud occurs when a cardholder receives goods, but denies making a purchase, or a family member makes a purchase without cardholder approval.

• Monitor systems and update as necessary. Business intelligence tools and real-time monitoring lead to immediate decisions and responses. Employ rapid access to fraud intelligence to inform rules changes in real time.
• Engage frequently with web and mobile site security management. Give these teams the tools, techniques and procedures to detect, contain and mitigate botnets. And considering the presence of both good and bad bots, put business policies in place to address this issue with clarity for both teams.