The total cost of ecommerce losses will exceed $48 billion globally in 2023, compared to $41 billion in 2021 owing to an increase in the use of alternative payment methods, such as digital wallets and Buy-Now-Pay-Later (BNPL) options that are creating new fraud risks, according to a report by Juniter Research.
“Online payment fraud includes losses across sales of digital goods, physical goods, money transfer transactions and banking, as well as purchases like airline ticketing. Fraudster attacks can include phishing, business email compromises and socially engineered fraud,” says the report.
As per the report, North America topped the fraudulent transaction value market, accounting for over 42% of global fraud in 2023, despite representing less than 7% of banked individuals globally.
Moreover, the report says BNPL to be a major risk for online payment fraud. “Given the delayed nature of BNPL payments, fraudsters can make several illegitimate payments using stolen card details before the fraudulent activity is identified, creating significant risk,” the report says.
The report recommends that BNPL vendors conduct robust identity verification at the point of onboarding to mitigate these risks. Nick Maynard, author of the report says, “To combat this fraud, eCommerce merchants must implement simple steps such as address verification, combined with risk-based scoring on transactions, which will allow merchants to best mitigate the massive fraud threats present.”
Notably, in India, online payment frauds have witnessed a significant surge in the past few years. According to the annual report by the Reserve Bank of India for the year ended March 2022, card and internet frauds surged to a whopping $1.55 billion in 3,596 cases, compared to $1.19 billion in 2,545 cases in the year-ago period.
According to another RBI report, in the past seven years, India lost at least ₹100 crore owing to banking frauds and scams. The report said that between April 1, 2015, and December 31, 2021, banking frauds worth ₹2.5 lakh crore was recorded across Indian states.
Meanwhile, in order to keep a check on online payment frauds, the RBI is considering setting up a fraud registry. The registry will include a database of websites and phones involved in digital fraud.