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Welcome to News & Events

Published on December 20, 2011, by in Industry News.

Welcome to The Fraud Practice’s FraudBlog; your source for updates on current events, commentary and best practices related to the eCommerce CNP payments and fraud industry.

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eCommerce and Mobile Banking Fraud Lead 2016 Fraud Increase in the UK

Financial Fraud Action (FFA) UK, a financial services industry research and reporting group, recently released their 2016 year-end payment card and banking fraud totals which showed an increase in card fraud overall, primarily led by card not present channel fraud. Changing trends include an increase in fraud attempts but targeting lower order amounts compared to last year, a shift from malware targeting banks to fraudsters directly targeting consumers and consumer account credentials, and mobile banking app fraud losses more than doubling from 2015.

The Financial Fraud Action UK organization is composed of major banks, payment acquirers and card issuers in the United Kingdom, and members report payment card, remote banking and check fraud losses each year. Over the years FFA UK has tracked significant increases in total payment card fraud against UK-issued cards, growing from £341 million in 2011 to £618 million in 2016. This marked a nearly 10 percent increase just from 2015, when the total fraud loss on UK-issued payment cards was £567 million.

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Post-EMV eCommerce Fraud Growth Abetted by Data Breaches

According to recent data from Experian, eCommerce fraud was 15 percent higher in the first half of 2016 compared the same period the year before, but for the full-year eCommerce fraud attack rates increased to 33 percent. This implies an even greater increase in CNP fraud in the second half of the year, and it is believed that the transition to EMV or chip cards is the primary reason behind this growth.

In the United States, the EMV liability shift occurred on October 1, 2015 and the rollout has been gradual. Likewise, the increase in CNP fraud was notable but in-line with recent years’ growth. By the end of 2016, nearly 2 million U.S. merchant locations were equipped to accept EMV cards, or 39 percent of all merchant locations, according to Visa. It was in 2016, and seemingly more so in the second half of the year, that the industry really started to experience the shift of more fraud attempts to the customer not present channel.

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MasterCard to Acquire NuData Security

At the end of March, MasterCard announced they had entered into an agreement to acquire NuData Security, the behavioral biometric and behavioral monitoring vendor based in Vancouver, Canada, for an undisclosed amount. A pioneer in the behavioral monitoring space, NuData offers MasterCard valuable technology and patents related to performing authentication covertly across all types of devices. This was the third major acquisition of a risk management solution provider by a card association in less than six months, and the second time that has happened in the past six years.

Maybe it’s coincidence, but things tend to come in three’s. After Visa acquired CardinalCommerce and American Express acquired InAuth, each in December, 2016, MasterCard announced a major risk management acquisition before the end of the first quarter. It’s not the first time the three have acquired major risk vendors around the same time. In 2010 Visa acquired CyberSource for $2 billion, MasterCard purchased DataCash for $520 million, and American Express acquired Accertify for $150 million. While terms from each of these acquisitions were public, the financial terms have not been disclosed for the three more recent deals announced by these card associations.

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Amazon Debuts Cash-based Alternative Payment Method

Amazon Cash is the latest payment method and feature supported by Amazon and was designed for the under- and unbanked. Consumers can request a barcode that is linked to their Amazon account, and when checking-out at a partner retail store location the customer can add between $15 and $500, using cash, which will become stored credit on their Amazon account. Amazon Cash was announced on April 3rd and is now available in the United States.

This new payment method immediately becomes a new option for U.S. Amazon customers. According to the FDIC, 7 percent of U.S. households were unbanked in 2015, while an additional 20 percent were considered underbanked. Amazon Cash provides a more direct way for these consumers, 27 percent of U.S. households, to make purchases with the online retailer.

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Global Spending to Increase on Fraud Detection, Cybersecurity and Big Data Analytics

Multiple studies and sources are coming to the same conclusion: organizations will be spending more on risk management and data analytics to keep up with growing fraud and business trends. This includes $9.2 billion spent on online fraud prevention services, $170 billion spent on cybersecurity and over $200 billion spent on big data analytics globally by 2020.

With payment and online fraud continuing to increase globally, Juniper research predicts annual spending on online fraud detection services across eCommerce merchants and financial institutions will reach $9.2 billion worldwide by 2020. This is just one aspect of risk management that online merchants and financial institutions have to deal with. Gartner estimates the global cybersecurity market exceeded $75 billion in 2015.

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Both Card Present and Card Not Present Fraud Grew in 2016

According to estimates from Javelin Strategy and Research, there was an 8 percent increase in U.S. consumers impacted by payment card fraud at the point-of-sale in 2016, while those victimized by card not present fraud grew at a much larger rate. Although the industry was bracing for an increase in CNP fraud with the rollout of EMV and more fraud attempts shifting online, the increase in card present fraud was less expected. Keep in mind that while more secure cards and POS terminals has and will shift more fraud attempts to the card not present channel, the fraudsters who specialize in counterfeit card and POS fraud are maximizing their efforts and potential now while they still can.

As one of the last major economies and modern payment systems to adopt the more secure EMV card and payment technology, the U.S. has plenty of history to study for perspective on what to expect. At least this was enough history to expect a shift of more fraud to the online channel in response to cracking down on counterfeit card fraud at the physical point-of-sale. The level of growth in CNP channel fraud that occurred in 2016, however, may still have exceeded expectations.

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Wal-Mart Makes Another Major eCommerce Move in Uphill Battle Against Amazon

Amazon has a stronghold as the largest eCommerce merchant in the United States, comprising as much as 43 percent of all U.S. online retail purchases in 2016. Wal-Mart, the largest brick-and-mortar retailer in the U.S., is one of the largest U.S. online retailers as well, but with online volumes less than one-fourth that of Amazon. With online and mobile sales continuing to cannibalize brick-and-mortar retail, Wal-Mart is focusing extensive effort on trying to take some of this online market share away from Amazon. After acquiring another major online retailer in late 2016, Wal-Mart has now announced a new online shipping strategy to undercut Amazon Prime, offering free two-day shipping on all orders of at least $35.

Amazon has been number one on Internet Retailer’s Top 500 list for many, many years now. In the latest ranking Wal-Mart is ranked fourth. While still the largest brick-and-mortar retailer in the United States, Wal-Mart sees the writing on the wall, and knows eCommerce is essential to the company’s continued growth and success.

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Alibaba Spin Off to Acquire MoneyGram for $880 Million

Ant Financial Services Group, the Alibaba Group affiliate formerly known as Alipay, announced the acquisition of major money remittance company Money Gram for $880 million. While already the online payments leader in China, this acquisition would greatly increase Ant’s international and U.S. presence, with the acquisition expected to close in the second half of the year.

Before their 2014 IPO, Alibaba spun Ant Financial Services Group off as a private company that would continue to operate the Alipay service. It has been estimated that more than half of online payments in China go through Alipay. In 2016, Ant held a private funding round that raised $4.5 billion, resulting in a company valuation comparable to American Express. Ant has plans to go public as well, but will likely now wait until after the MoneyGram merger is complete.

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Black Friday Sets New U.S. Total Online Sales Record, Surpassed by Cyber Monday Days Later

Consumers continue to shop more online and from their mobile devices on Thanksgiving, Black Friday and Cyber Monday with another record-setting year. Black Friday 2016 turned out to be the third largest desktop eCommerce shopping day of all-time  in the U.S., but Adobe, including mobile commerce, estimated online Black Friday sales to reach $3.34 billion, surpassing even Cyber Monday from last year. Black Friday became the largest online shopping day in the U.S. including desktop, smartphone and tablet transactions, but this status was short-lived and soon surpassed by this Cyber Monday, when consumers spent $3.39 billion online across all devices.

According to comScore, from November 1st to Black Friday consumers spent over $24.5 billion online from PCs, a 12 percent increase from the corresponding time frame last year. Much of this increase in desktop eCommerce spending occurred on Thanksgiving and Black Friday, when eCommerce volume increased 17 and 19 percent, respectively, from 2015 levels. This included $1.29 billion in desktop eCommerce sales on Thanksgiving and nearly $2 billion spent on Black Friday. Adobe, which included mobile and tablet sales in addition to desktop eComerce, estimated total Black Friday online sales at $3.34 billion, a 22 percent increase from 2015. This marked the largest online shopping day in the U.S. of all-time, records that had previously been surpassed each Cyber Monday.

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The Holiday Season is Also Fraud Season

It’s no secret that fraudsters increase their activity and fraud attempts during the holiday season when many merchants are at peak volume, but considering other fraud factors ACI Worldwide predicts a more than 40 percent increase in fraud this holiday season.  Meanwhile the FBI warns of fraudulent merchants, mobile apps with malware and work from home scams that become more prevalent during the holiday season.

According to estimates from ACI Worldwide, online retailers will see a 12 percent increase in fraud attempts globally this holiday season compared to last year, although the average purchase amount per fraud attempt is expected to be lower. Card Not Present channel fraud attempts in the United States, however, are expected to increase at a much higher rate, 43 percent by volume compared to last holiday season. This significant increase is primarily due to the expected shift in fraud to the CNP channel following the rollout of EMV cards.

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