E-COMMERCE FRAUD LANDSCAPE

TOOLS USED BY UK E-COMMERCE COMPANIES TO ASSESS PAYMENT FRAUD RISK

Currently used Planning to use in 2017
Source: CyberSource 2016

VALIDATION SERVICES
Card verification number 75% 14%
Address verification services 68% 20%
Payer authentication 64% 21%
Postal address validation services 51% 24%
Credit history check 39% 28%
Telephone number verification/reverse look-up 39% 29%
Google Maps look-up 33% 22%
Paid-for public record services 32% 28%
Social networking sites 22% 24%
Biometric indicators, such as voice recognition 17% 27%
Two-factor phone authentication 15% 30%

PROPRIETARY DATA/CUSTOMER HISTORY

Customer order history 57% 22%
Customer website behaviour/pattern analysis 42% 26%
Negative lists/backlists 38% 33%
Fraud scoring model 36% 32%
Positive lists/whitelists 35% 29%
Order velocity monitoring 29% 23%

MULTI-MERCHANT DATA/PURCHASE HISTORY

Multi-velocity/identity morphing models 24% 27%
Shared negative lists 23% 34%

PURCHASE DEVICE TRACKING

IP geolocation information 26% 31%
Device fingerprinting 18% 31%

WHERE E-COMMERCE FRAUD CAN HAPPEN FRAUD CHALLENGES OF GREATEST CONCERN

TO UK E-COMMERCE COMPANIES
ORDER PAYMENT SYSTEM/
PLACEMENT NETWORK Unable to use Too much revenue
PROCESSING OPERATIONS all customer/ being lost to fraud
transactional
data in fraud
management
Inflated retail prices for fake Credit/debit card fraud using Phishing fraud, such as 37% 28% 24% 23%
discounts stolen information identity theft
Dependence on in-house fraud
Unauthorised price change Payment gateway Intrusion/cyber attacks, such systems straining IT resources
Unauthorised/fake orders vulnerabilities, such as hacking as malware Turning away too many
good customers when
Cash on delivery (non-receipt Pharming redirecting
Presence of blacklisted trying to detect fraud
of payment, fraud by cash website traffic to another,
entities
collection agent) fake site Inability to measure Spending too much time
System manipulation, such fraud metrics manually reviewing too
as redeeming coupons on accurately by many orders
cancelled orders sales channel
45% 46%

RETURNS SELLERS/ DELIVERY Source: CyberSource 2016

AND REFUNDS VENDORS LOGISTICS PREVALENCE OF CERTAIN FRAUD TYPES

POSITIONING FACING UK E-COMMERCE COMPANIES

Stolen credit cards 78%

Counterfeit product returns Fake/forged documents for Leakage/misappropriation/ Fake accounts, account takeover,
registration theft of goods from 52%
Return of used products account abuse
warehouse
Ghost vendors fraud Card testing 33%
Tampering with product in
Change of shipping address
order to return it Impersonation by sellers for
after order placement to Friendly fraud 30%
buy-back of goods
Charge-back without product deliver the goods
return Inadequate vendor Promotions/referral/coupon abuse 24%
Product intentionally
background checks resulting misplaced/replaced/not
in third-party fraud risks Money laundering 18%
delivered
Delivery of defective/ Fake goods and listings 15%
counterfeit products
Resellers and reshippers 15%
Source: Deloitte 2016
Source: Sift Science 2015
TOP COUNTRIES BLOCKED BY UK MERCHANTS DUE TO HIGH FRAUD RATES

NIGERIA ROMANIA RUSSIA US TURKEY AUSTRALIA

42% 19% 15% 15% 13% 13%

Source: CyberSource 2016
ESTIMATED E-COMMERCE FRAUD LOSSES ON UK-ISSUED CARDS, 2006-2015
Source: Financial Fraud Action UK 2016

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

154.5M 178.3M 181.7M 153.2M 135.1M 139.6M 140.2M 190.1M 219.1M 261.5M