Ensuring secure online transactions and mitigating the impact of fraud is critical to maintaining customers’ confidence and trust when purchasing products and services. However, as shown in research conducted by the Ponemon Institute, sponsored by PayPal, organizations continue to struggle with achieving the right balance between preventing failed transactions and having a secure payment process. Organizations represented in this research lose an average of $3.7 million per year due to fraudulent online transactions.
While most organizations are effective in preventing lost sales at the checkout, they struggle in balancing strong fraud protection with preferred payment methods. Customer sales are frequently lost due to transactions being declined.
The following findings provide guidance for reducing online fraud risks:
Most organizations are using a team fully dedicated to detecting, responding, and containing online fraud. 64% of respondents say their organizations have an online fraud team dedicated to its detection and containment, and leading the response.
Despite the use of fraud teams, only slightly more than half of respondents say their organizations are highly effective at reducing online fraud when accepting payments at checkout. Only 47% said they were highly effective at investigating fraud.
The lack of collaboration between fraud and cybersecurity teams can be a barrier to payment processing fraud prevention. One possible reason for the difficulty in achieving collaboration is that important decisions are divided between the fraud function and IT security instead of being cohesive.
An average of 679 chargeback frauds are experienced each month by organizations in the study, who then spend 31 hours investigating and responding to them.
Steps that can be taken to reduce chargeback fraud include:
AI and machine learning are the top technologies used to detect online fraud. The primary benefit of automated fraud protection is greater efficiency in the investigation of online fraud. 67% of respondents said their organizations use an automation layer to optimize fraud protection and authorization rates, with the result of:
To understand the threat, to develop more efficient ways to fight fraud and learn how to protect customer data, read the full Cost of Online Fraud Report here.
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