The growth of EMV chip-enabled credit cards has helped make brick-and-mortar retail shopping more secure. In order to complete a transaction, the card (and chip) must be physically present, and in countries that have adopted EMVs as their official standard, retail credit card fraud has gone down.
The U.S. is one of the last major markets to delay EMV adoption. Thus, it's not surprising that we have more credit card fraud than the rest of the world combined.
However, as U.S. merchants continue to embrace EMVs at brick-and-mortar stores, there exists a corresponding rise in online credit card fraud. This is because EMVs offer little protection in e-commerce environments.
How quickly is online fraud growing?
- In 2010, online credit card fraud throughout the U.S. and Canada totaled $2.7 billion.
- In 2011, it was $3.4 billion.
- By 2018, total online fraud could reach $6.4 billion.
These numbers are shocking. However, it's worth noting that online shopping is on the rise — with some years producing double-digit growth. By 2018, total online spending could exceed $2.25 trillion. Therefore, it's reasonable to expect that online fraud would also increase.
What Industries Are Most Affected by Online Fraud?
Finding exact numbers is difficult. Merchants are usually reluctant to report their losses — at least to the general public. Yet, some of the hardest hit industries include:
1. Digital Products and Services
It's very difficult to track fraudulently purchased digital goods. After all, emails are anonymous and IP addresses are easy to fake. This is why thieves frequently go after information products, magazine subscriptions, media streaming services, gambling sites and anything else that doesn't require a physical shipping address.
2. Online Banking
It’s one thing to steal a credit card, there's only so much damage you can do — and most card issuers offer varying levels of liability coverage. Though as Americans move more of their finances online, they face newer and graver risks. A thief can wipe out your entire bank account in a matter of seconds, and unlike credit card companies, banks don’t usually cover losses.
This one is rather surprising because the thief is right there:
- You know what he looks like (thanks to all of the security cameras throughout the terminal).
- You have his ID (captured during the check-in process).
- You even know what seat he's in (and whether he ordered the kosher or the vegetarian meal).
Yet fraud continues to cost the airline industry more than $1 billion a year.
How to Protect Yourself from Online Fraud
No one is 100 percent immune from online fraud:
- Not airlines.
- Not Home Depot or Target.
- Not your neighborhood bank.
Nevertheless, as a merchant, you can set up deterrents to make online fraud less likely. Thieves will usually go after low-hanging fruit. This is why they’re abandoning retail scams in favor of online theft.
Let us help you make your e-commerce store as secure as possible. Schedule a free appointment with our fraud management team today.