Pandemic Expedited Online Transactions, And Frauds As Well
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This past year saw an exponential growth and reliance on digital commerce as consumer behavior around the world adapted to a new normal. In the US alone, e-commerce penetration hit an all-time high of 21.3 per cent in 2020, a more than 5 per cent gain from online retail sales the previous year, according to DigitalCommerce360. But while this rise in e-commerce and digital payments has opened up new revenue potential for merchants, it has also led to an increase in online scams, sophisticated attempts at fraud by malicious actors and resulting new operating risks for merchants.
According to a new study, The Real Cost of Online Fraud, from the Ponemon Institute and sponsored by PayPal, the number one challenge organizations are facing when it comes to preventing this rise in online fraud and risk is battling this increasing sophistication of fraudsters. This is followed closely by not having the right tools or practices in place to mitigate online fraud or achieve compliance with IT security and privacy regulations.
The real cost of online fraud
The new research sought to understand the current fraud landscape, barriers and challenges organizations face in mitigating the risk of online fraud and the resulting financial losses.
Of the more than 600 analysts and senior leaders surveyed in key verticals including retail, travel, hospitality and entertainment, it was reported that organizations are losing an average of $4.5 million per year due to online fraudulent transactions. Despite these losses, only half (51 per cent) say their organizations are prioritizing protecting online financial transactions, the report shared.
Furthermore, respondents indicated that COVID-19 has seriously affected their organizations’ ability to protect themselves from online fraud. Prior to COVID-19, 45 per cent of respondents rated their effectiveness in reducing online fraud as high or very high. Today, only 34 per cent of respondents rate their effectiveness as high or very high.
Many businesses have seen a rise in e-commerce as an opportunity to reprioritize their digital transformation initiatives. While digital transformation is crucial to the success and longevity of a business, 81 per cent of respondents indicated their organizations are more vulnerable as a result of digital transformation.