February 4, 2014, 10:50 AM

Mobile and same-day deliveries pose fraud risks for e-retailers

A new Forrester report advises e-commerce operators to use “big data” to combat online fraud, which cost $3.5 billion last year the U.S and Canada.

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E-retailers fighting fraud may often feel as though they are rolling the boulder up the hill only to see it roll back down at the end of the day. That may well be true—criminals are always seeking new angles of attack—but a new Forrester Research Inc. report urges e-commerce operators looking to reduce their fraud costs to pay special attention to the mobile channel, and to use more data to identify fraud risks.

Online fraud cost U.S. and Canadian retailers some $3.5 billion in 2012, up 3% from the year before, estimates CyberSource Corp., which sells payment processing and risk management services.  The Forrester report, entitled “Market Overview: eCommerce Fraud Management Solutions, 2014,” highlights how criminals might target e-retailers in the year to come, and what web merchants can do to better protect themselves.

With e-commerce advancement comes increased risk, the report suggests. For instance, as more e-commerce operators experiment with or launch same-day delivery services—Amazon.com Inc., eBay Inc. and Google Inc. have such programs—those operators should adapt “real-time screening capabilities” to scan for fraudulent transactions without delaying deliveries. The Forrester report says that “big data”—generally, the use of customer data acquired via the web and other means—can help retailers spot potentially fraudulent transactions via such information as IP addresses, time of day that web, how long the browsing session lasts and other factors that can reveal patterns used by criminals.

Mobile commerce, too, represents a potentially fertile field for criminals bent on fraud, write Peter Sheldon, Andras Cser and Lily Varon, the Forrester analysts who crafted the report. “As fraud managers crack down on online fraud, fraudsters move to other emerging channels, such as smartphones [and] tablets,” the authors state, adding that by 2017, mobile commerce will account for nearly half of e-commerce purchases in the United Kingdom, Germany, France, Spain, Italy, Sweden and the Netherlands.

Citing CyberSource, the Forrester report says that while the revenue loss rate from fraud is higher on mobile devices—1.4%—than sales completed on desktop computers, at physical stores or at call centers, “only 28% of companies are tracking fraud coming in through mobile. [Criminals] aren’t oblivious to this fact. For example, they are using a tactic called device emulation, whereby their PC looks like a mobile device in the merchant’s systems in order to capitalize on the nonexistent or more lenient fraud screening.”

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