The recently released U.S. Retail Fraud Survey 2015 has reported a substantial increase in online credit card fraud. According to the report, credit card fraud—which has been described as the biggest area of online loss for many US retailers—is up by 12% when compared to last year.
The Survey, launched in 2013, was published by Retail Knowledge and sponsored by intelligent cash handling experts Volumatic. Results are based on primary research into the systems, processes and strategies used by 100 of the top U.S. retailers. It provides a detailed picture into the evolving credit card fraud challenge facing retailers promoting a collaborative stance by the retail risk and loss prevention community against retail fraud.
E-commerce is emerging as an increasingly important aspect of retail business models as many companies continue to look for new ways to reach retail customers and increase retail sales. While looking for new and inventive ways to enhance the customer experience retailers are increasingly exploring new options to reach their customers and make online purchases. Mobile technologies and fulfillment options are only furthering the reach of omni-channel retail opportunities for the retail customer. However, these conveniences are often met with new challenges for retail businesses in the United States.
According to the report, credit card fraud overwhelmingly remains the biggest area of online loss for retail organizations, accounting for 66 percent of online losses and resulting in an estimated $1.8 billion cost to retailers. However, this is a multi-billion dollar problem for consumers as well as retailers, considering the cost of retail fraud is typically passed on in the form of increased prices for the customer.
The latest report shows that while online sales currently account for an average of 6% of total sales, retailers are estimating that up to 15% of sales will be made through e-commerce resources over the next three years. Considering this anticipated rise in online sales and the potential for a similar increase in online credit card fraud, the role of online fraud prevention will be even more important. Loss Prevention executives will increasingly need to look at protection across all sales channels, not just the stores.
James Harris of Volumatic, the US Retail Fraud Survey sponsor, commented: “An estimated cost of $1.8 billion in fraudulent credit card transactions is a heavy burden for the retail market to bear. If retailers’ estimates of online sales growth are correct, from an average of 6% of total sales to a figure of 15% in North America, then this cost to retailers (which is ultimately borne by consumers) is going to grow exponentially.”
Cyber-criminals are becoming increasingly sophisticated in this type of credit card fraud, discovering that the anonymity and remoteness of online shopping is an attractive environment in which to apply their illicit resources. While it remains to be seen how the introduction of Chip and Pin technology impacts the credit card fraud issues that retailers face when dealing with electronic payment instruments, of one thing we can be sure—the criminal fraternity will be looking to exploit any weaknesses as these new technologies are adopted.