Online fraud forecast to reach $25bn by 2020

Online fraud is expected to reach $25.6 billion in value by 2020, up from $107.7 billion last year, according to new research.

This means that by the end of the decade, $4 in every $1000 of online payments will be fraudulent, says a new study from UK company Juniper Research.

Online Payment Fraud: Key Vertical Strategies & Management 2016-2020 says the implementation of Chip and Pin services at POS (point of sale) locations in the US will most likely be a key factor driving online fraud. It argued that the greater security afforded by Chip and Pin technology will persuade fraudsters to switch their attention from the in-store environment to the CNP (card not present) space.

Three hot areas for online fraud are identified in the report: eRetail (65 per cent of fraud by value in 2020, up from $16.6 billion); banking (27 per cent, $6.9 billion); and airline ticketing (6 per cent, $1.5 billion).

It also claims that eRetail will be particularly susceptible to online fraud, with the value of this fraud sector growing at twice the rate of banking and seven times that of airline ticketing. The research highlights two key areas for fraud within eRetail: the buy-online, pay in-store approach, and electronic gift cards.

It is argued that the continuing migration to online and mobile shopping, of both digital and physical goods – reaching more than $1.7 trillion last year – will provide a further incentive for fraudsters to focus attention on these channels.

Meanwhile, the research claims that though banks can counter online banking fraud through new technologies such as 3D-Secure and device fingerprinting, these measures often only provide temporary respite as fraudsters soon find new practices.

Similarly, while extensive efforts to deploy sophisticated fraud detection and prevention (FDP) systems have reduced fraud significantly for some major airlines, that industry has also seen fraudsters shift their focus to other perceived weak spots in the system.

“A few larger airlines claim they have reduced eTicket sales fraud to less than 0.1 per cent,” says research author Gareth Owen. “When thwarted, however, fraudsters quickly move on to easier pickings, such as frequent flyer fraud.”

Juniper offers a white paper, Managing the Risk of Fraud, free on its website together with further details of the research and an interactive forecast. Juniper has been analysing the digital commerce and FinTech sector for more than a decade.


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