Stripe's global study on online fraud reveals interesting findings
By Chong Jinn Xiung December 15, 2017
- Report finds that fraudsters generally prefer to strike when no one is looking
- Businesses need to remain more vigilant and observant of transactions that occur outside of normal business hours
Fraud is on the rise—and a new report released today from payment platform Stripe unveils several new patterns to assist online businesses as they combat fraudulent activity this holiday shopping season.
While chip-enabled credit cards have made brick-and-mortar shopping safer, fraudsters are increasingly targeting online stores. And unlike physical stores, online businesses are unfortunately responsible for paying the associated costs. In fact, on average, every US$1 of fraudulent orders costs an online business an additional US$2.62.
Stripe looked across a year’s worth of data to seek out fraudulent behavior patterns by country, time-of-day, industry, and other factors to guide businesses’ approaches to battling online fraud.
Among the insights shared was the fact that in Singapore, fraudulent transactions are significantly larger than normal transactions. But the most interesting fact was that the highest online fraud rates occur during days and times when there aren't many people shopping.
As an example, for U.S. businesses, fraud rates as a percentage of overall traffic increase in the summer and in late December, but not on heavy shopping days like Black Friday, as might be expected.
Stripe head of Southeast Asia and Hong Kong, Piruze Sabuncu (pic) said this trend could be happening because fraudsters prefer to strike when no one is looking--when the reaction time of businesses are low.
"It also could be because these fraudsters operate from different countries and thus are conducting their activities during hours when business' regular customers are asleep," she said.
There could be a possibility that fraudsters have day jobs and are conducting their illicit acitivities during their free time, after work, Piruze pointed out. Regardless of the hypothesis, businesses should add extra security and scrutinise transactions made out of normal business hours. This may include conducitng manual review escalations or enact more stringent filters
In light of this, how can businesses stay on top of fraudsters while protecting their customers and themselves from online frauds? For one, businesses engaging in cross-border trade should tackle country-specific fraud by testing geography-based rules or seek for more information from customers such as asking for their CVV numbers and their full addresses to do more thorough checks.
Another method is to add manual reviews or more stringent filters especially for transactions that occur outside of their usual business hours.
"It is important to note that fraudulent transactions online are still within a small percentage of overall shopping volume. So businesses should be cautious about instituting blanket rules that may end up blocking legitimate transactions along with fraudulent ones," she said.
Working with payment processors that monitor and react to these complex fraud patterns over time can help businesses make the right tradeoffs between managing fraud and maximizing profitability, Piruze added.