E-commerce and M-commerce continue to rise in 2016
Retail e-commerce sales (not including travel, restaurant and event ticket sales) over any device are projected to experience a 23.7% growth rate and to reach over $1.9 trillion in 2016, according to eMarketer. This growth is expected to continue, with the portion of total e-commerce sales of all retail sales, rising from the current level of 8.7% to 14.6% in 2020, reaching over $4 trillion.
China leads the market in e-commerce spending, representing 47% of the global e-commerce sales market, at over a projected $899 billion in 2016. The second largest market is North America, which is poised to see an increase of 15.6% in e-commerce spending, reaching $423.34 billion.
North America is projected to continue its double-digit growth rates through 2020, thanks in part to trends in online grocery shopping and growing mobile commerce adoption. Mobile payments are expected to make up 20.6% of the 2016 e-commerce sales increasing to 45% of all e-commerce payments in 2020, according to Business Insider Intelligence.
Correlating growth in online fraud in 2016
With the consistent growth in online payments, there is a correlating increase in online fraud. According to a 2016 PYMNTS report, close to 4.8% of the money spent online was at risk of a fraud attack in Q4 2015, up from 2.9% in Q1 2015. The volume of fraud attacks increased 215% between the first quarter and the last quarter of 2015. The rate of e-commerce fraud doubled between 2014 and 2015 costing online retailers $32 billion in 2014, according to BI Intelligence.
According to the LexisNexis 2016 True Cost of Fraud Study, the percent of successful fraud transactions over mobile, amongst large remote channels has grown year over year from 26% to 35%. It is therefore important to all large retailers to protect themselves across all channels, instating technologies and practices which will protect them from online fraud on desktop devices and mobile channel fraud attempts.
LexisNexis further suggests that e-commerce and m-commerce companies integrate multiple solutions and a multi-layered approach of advanced identity and transaction verification / authentication. Their survey found that companies that do so realize better results in their fraud management.
Fraud security measures for desktop
A host of solutions to combat online fraud that originates from a desktop computer exist. These solutions include:
- Encryption – Provides encryption of payment data to protect the customer from card theft.
- Geolocation – Enables businesses to identify the location of the device to detect fraud, using wifi or IP location.
- Device fingerprinting – Enables businesses to identify a specific device using a unique IP address identifier.
- Security software and alerts – Provides businesses with data on suspicious activity, such as multiple orders placed by the same person, with different credit cards or phone numbers which do not match the billing address area code.
- PCI DSS compliancy – uphold requirements for PCI security, performing audits as required.
M-commerce fraud security solutions
Due to the mobile nature of m-commerce, the above security solutions are not all relevant for this platform. Secure mobile payment solutions and a multi-layer approach are vital strategies in combating fraud. To date, over 33% of mobile retailers employ at least 4 security measures in order to minimize fraud over mobile devices. According to The Mobile Payments and Fraud 2016 report by Kount. These measures include:
- Unique device identification – Based on hardware, software, and network components to identify a specific device. This solution identifies devices used before, enabling the creation of a user profile and reputation.
- Secure tokens – An authentication and encryption method for safeguarding payment details for safe transmission of this sensitive data
- Fingerprint scans or biometric behavior– Utilization of the users’ physical or behavioral data to identify the customer.
- Fraud scoring – Used to score and rate transactions based on their geolocation, size and more
M-commerce is on the rise, both in volume of transactions and the number of companies accepting payment via mobile device, with 82% of merchants actively supporting mobile payments today, compared to 69% in 2015.
However, an alarmingly high percentage of merchants are unaware of the expanse of the fraud they are subject to, with 43% not able to quantify how high their losses from fraud are. It is therefore important for m-commerce businesses to utilize a mobile payment solution, which ensures a high level of security.