As eCommerce sales continue to climb, so do the opportunities for fraudsters looking to exploit weaknesses in online retail channels. The rapid growth of digital shopping, accelerated by changing consumer habits and expanded fulfillment options such as curbside pickup and buy online, pick up in-store (BOPIS), has created new challenges for merchants. While these services offer convenience and speed for consumers, they also provide new avenues for eCommerce fraud, particularly when criminals use stolen payment credentials to quickly obtain high-value merchandise before suspicious transactions can be detected.
To combat these threats, merchants are increasingly turning to advanced fraud prevention tools powered by machine learning and artificial intelligence. These technologies can analyze transaction patterns in real time, helping retailers identify suspicious activity and reduce losses while maintaining a seamless customer experience.
Online merchants continue to ride the rising tide of e-commerce sales, but fraudsters are getting in on the action as well. They’re using card-not-present (CNP) transactions and curbside pick-up to take off with the goods. Many retailers have expanded online order fulfillment options and store pickup has become popular with consumers not wanting to pay and wait for delivery.
So fraudsters take advantage of the quick turnaround time to place an online order and then show up at the store in the next hour to pick up their stuff. Machine-learning fraud detection models will increasingly help online merchants to thwart these criminal transactions.
The following excerpt from a Yahoo! News article reports more on the topic:
Global eCommerce transactions increased by 19 percent in July 2020 compared to July 2019, according to analysis by ACI Worldwide (NASDAQ: ACIW) of hundreds of millions of eCommerce transactions from global merchants. The data also showed that sales of outdoor items saw the highest year-over-year (YoY) increase from nine percent in 2019 to 12 percent in 2020.
Fraud continues to increase as criminals take advantage of card-not-present methods of payment, including buy-online-pick-up-in-store or click-and-collect methods. While fraudulent transactions by volume were slightly lower in 2020 (2.3%) compared to 2019 (2.6%), the data showed that fraud transactions by value were higher in 2020 (4.4%) compared to 2019 (3.7%).
“Fraudsters are targeting higher value items like electronics and luxury brand names, especially within newer channels such as curbside pick-up and in-parking lot pick-up,” said Debbie Guerra, executive vice president, ACI Worldwide.
“We continue to see a huge increase above industry averages in eCommerce sales year-over-year,” Guerra continued. “As more brick-and-mortar stores reopen with COVID restrictions, we are seeing card-present transactions slightly increase; however, we expect the eCommerce trend to continue post-COVID as consumers experience the convenience and speed of digital payments.”
The continued growth of online shopping shows no signs of slowing, but neither does the evolution of eCommerce fraud. As fraudsters target higher-value purchases and exploit fulfillment methods like curbside pickup and click-and-collect, merchants must balance convenience with security. Investments in machine learning-based fraud detection and real-time transaction monitoring will become increasingly important as retailers seek to protect revenue and customer trust.
While digital commerce creates new opportunities for merchants, it also expands the attack surface for criminals. Organizations that proactively address eCommerce fraud with integrated risk management tools will be better positioned to support growing online sales while minimizing fraud-related losses.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group
