The cost to the UK economy of eCommerce fraud is expected to grow by £30m by 2015, as mobile phones and social networking sites create new opportunities for criminals. So says internet payment service provider, PayPoint.net.
According to a report conducted by the Centre for Economic and Business Research (CEBR), on behalf of PayPoint.net, the impact of eCommerce fraud on the UK economy is likely to rise from £165.2m in 2011 to £195.3m in 2015.
The report, entitled The rise of new e-commerce channels: Shoppers Delight or Gangsters Paradise? states that this is largely due to new payment channels being more vulnerable to fraudulent activity during the years of early adoption, as it takes time to discover and resolve underlying security issues.
According to the report, the growth of mobile and social media shopping is expected to drive total online sales to £33.7bn by 2015, an annual growth rate of 4.5 per cent. The report also forecasts that the number of internet users buying products via their mobile phones will rise by 5m, to 10.5m, by 2015, while social media is also expected to be a significant growth area, with an additional 2.9m users buying through these channels by 2015. However, this boost to the eCommerce market has a downside, bringing with it a far greater fraud risk, the report notes.
Since its peak in 2008, the economic impact of eCommerce fraud has declined, falling by 16 per cent in 2009 and a further 4 per cent in 2010, as businesses adopted more secure payment mechanisms and fraud screening detection tools, such as Verified by Visa and Mastercard SecureCode. However, the introduction of new online shopping channels will reverse this trend, according to PayPoint.net’s report, and shopping through social media sites, mobile browsers and apps is expected to be the biggest contributor to the losses, costing £24m by 2015. 
“Shopping on a mobile phone or favourite social media site is the next big thing in eCommerce, but criminals are likely to capitalise on poor awareness of the risks by consumers and retailers alike,” says PayPoint.net managing director, Michael Norton. “This study shows these new ways of shopping could be victims of their own successes for all the wrong reasons. The next few years will be a period of trial and error, as mobile and social media commerce evolves in the UK.
“These large increases in fraud could have a big impact on retailers, as they find themselves having to watch for (and subsequently account for) new kinds of fraud they haven’t seen before. It will be more important than ever for online retailers to have a robust, traditional eCommerce fraud prevention system in place so that best practice strategies can be rolled out to the new shopping platforms.”
PayPoint.net says its FraudGuard fraud management platform reduces online fraud by up to 70 per cent. It checks each transaction against 35 fraud criteria in real-time, allowing online retailers to fine-tune fraud policies and protect their customers against fraudulent activity, such as ID theft and payment card fraud.
You can access the full report here.
