Elie Casamitjana, Product Manager Fraud Prevention Solutions for online payment company Ogone, looks at the scale of the fraud problem facing Europe and technology advances that are helping to combat the threat.
Ecommerce is growing rapidly, both globally and within Europe. Current forecasts (eMarketer) are that the B2C e-commerce market will reach $1.85 trillion by 2016. While North America ($580 billion) and Asia Pacific ($707 billion) lead the way, Western Europe’s share of the market will be $388 billion.
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As ecommerce grows its share of retail transactions, so does the potential for merchants to expand cross border without the need for a physical presence in each country.
Market growth will be determined by a number of factors that will vary from country to country, including: Internet penetration, age distribution of the population, geographical spread, customer confidence with new payment mechanisms and income distribution.
An additional factor will be the availability of products and services via existing physical outlets.
Increasing opportunities bring new threats
Ecommerce growth has resulted in a shift in the way criminals address payment fraud. The fight to contain plastic fraud levels has been likened to the action of pressing down on a balloon (as you press down on one area so another increases in size).
Ecommerce market expansion has coincided with the introduction of EMV technology at the point of sale in many countries. As the potential for counterfeit fraud has been addressed so criminals have looked increasingly at transactions where the card is not present (CNP) as an appealing avenue for fraud.
In the UK, while counterfeit fraud is around a quarter of its 2008 level, CNP now accounts for 63 percent of total fraud. The European Central Bank Second Report on Card Fraud (2013) looked at card fraud experience across 27 EU countries.
It found that (depending on the individual country) fraud to sales ratios in a CNP environment were up to 30 times higher than for transactions where the card was present. For the US, which is in the process of addressing EMV, the message is clear and merchants will need to anticipate the potential threat of CNP fraud as chip migration progresses.
Different challenges
For merchants wishing to expand cross border, e-commerce brings opportunities and challenges. Each market is different, with differing logistics, local preferred payment methods, varied levels of fraud and indeed differing attitudes to fraud.
Just in regard to payment methods within Europe, for example, there are a variety of practices: credit card and local card schemes are mainstream in the UK, France and Belgium; German consumers are far more likely to use a direct debit transfer; in the Netherlands over 70 percent of payments are made via iDEAL, enabling direct transfers from the customer’s bank account.
Merchants wishing to grow sales in these countries must offer the preferred payment options. In the next part, we will look at merchant attitudes and provide a few guidelines for selecting a suitable ecommerce fraud prevention system.
Click on the link to download Ogone’s free whitepaper offering a deeper look at ‘Online & mobile payments: New opportunities & threats‘.
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