# 7 Trends in Online Payment Fraud E-Commerce Merchants Need to Know

> 7 online payment fraud trends merchants must watch, from friendly fraud to voice commerce. See why card-not-present losses could hit $71 billion.

TL;DR

Online payment fraud keeps evolving across seven areas: friendly fraud, chargeback fraud, international ecommerce, wire fraud, mobile wallet fraud, malware, and emerging voice commerce. As fraudsters adapt to new channels and devices, merchants face rising losses, with Juniper Research projecting card-not-present fraud could cost retailers 71 billion dollars globally over five years. ClearSale recommends a comprehensive approach that combines machine learning to flag suspicious patterns with human review, while keeping the customer experience fast and low friction.

Fraudsters are continually looking for new ways to ruin the e-commerce shopping experience. And whether they’re hacking mobile devices and accounts or filing fraudulent chargebacks, they’re getter better at staying one step ahead of payment fraud protection.

The good news is that e-commerce sales just keep growing – with 2017 seeing a comfortable [16% growth in revenue](https://www.trulioo.com/blog/global-ecommerce-fraud/) over 2016. To make sure fraudsters don’t take any more of this pie, it’s up to merchants to be aware of new developments on the fraud landscape. Once merchants educate themselves on the tricks fraudsters like to use, they can beef up their security and stop those fraudsters in their tracks.

Here are seven of the biggest payment fraud trends online retailers should be watching for and defending against this year.

## 1. Friendly Fraud

Friendly fraud is the term used when a cardholder incorrectly files a [chargeback](https://blog.clear.sale/ecommerce-owners-do-you-know-what-a-credit-card-chargeback-is) on a purchase they forgot they made. Generally, these customers aren’t trying to be deceitful; they’re just making an honest mistake. Even so, this fraud hits merchants hard: E-commerce retailers lost a [whopping $4.8 billion](https://paysimple.com/blog/does-your-small-business-have-a-friendly-fraud-problem/) to friendly fraud in 2016.

## 2. Chargeback Fraud

Chargeback fraud isn’t any less devastating. In these scenarios, the customer files a chargeback on a legitimate transaction so they can keep the product *and* receive a full refund on the original purchase. This means the retailer loses the product, sunken shipping costs, high chargeback fees and more. It’s a massive problem, and estimated chargeback losses are projected to top [$31 billion](https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/forbescommunicationscouncil/2017/09/13/how-to-prepare-for-visa-chargeback-rules-coming-april-2018/&refURL=https://search.yahoo.com/&referrer=https://search.yahoo.com/)by 2020.

## 3. International e-Commerce

Mobile commerce has opened up a literal world of e-commerce opportunities, enabling merchants to [expand globally](https://blog.clear.sale/what-to-know-before-you-start-shipping-internationally) and grow their sales by [as much as 15%](https://www.dhl.com/en/press/releases/releases_2017/all/express/cross_border_ecommerce_is_one_of_the_fastest_growth_opportunities_in_retail_according_to_dhl_report.html). But international sales also opens retailers up to new risks and expensive payment fraud. By the year 2022, global losses due to fraud are expected to reach [$71 billion](https://www.juniperresearch.com/home).

## 4. Wire Fraud

A somewhat misleading name, wire fraud refers to any fraud involving communications technology, including emails, text messages and phone calls. [Phishing](https://blog.clear.sale/phishing-and-pharming-you-and-your-customers-risk) is one of the more well-known wire fraud scams — and it’s well-known because it *works*. Approximately [30% of phishing emails](https://blog.barkly.com/phishing-statistics-2016) get opened, leaving businesses scrambling to protect their sensitive data before financial and reputational damage is done. Phishing attacks [grew 250%](https://blog.barkly.com/phishing-statistics-2016) in first-quarter 2016 alone, and large companies report that these attacks costs them [$3.7 million yearly](https://www.csoonline.com/article/2975807/cyber-attacks-espionage/phishing-is-a-37-million-annual-cost-for-average-large-company.html).

## 5. Mobile Wallet Fraud

Payments using such [mobile wallets](https://blog.clear.sale/do-alternative-payment-methods-work-for-e-commerce) as Apple Pay and Visa Checkout are expected to account for [22% of online purchases](https://blog.clear.sale/alternative-payment-methods-are-they-right-for-e-commerce) by 2019. However, unsecured mobile devices, [easy-to-guess passwords](https://blog.clear.sale/post/the-25-most-popular-passwords-of-2015) and unencrypted transmissions make it easy for hackers to steal sensitive data and capture payment credentials. Additionally, cybercriminals have been busy [developing and launching malware](https://www.trulioo.com/blog/global-ecommerce-fraud/) that targets mobile devices to gather data, take control of the devices and modify their settings.

## 6. Malware

Malware used to be reasonably easy for merchants to identify and stop simply by using off-the-shelf antimalware software. Unfortunately, malware has become increasingly harder to detect, especially with the proliferation of Internet of Things (IoT) devices. Many IoT units have insufficient security features in place to prevent hijackings – something many new parents have discovered as their [wireless baby monitors](https://www.computerworld.com/article/2878741/hacker-hijacks-wireless-foscam-baby-monitor-talks-and-freaks-out-nanny.html) have been targeted by hackers. Unfortunately, consumers typically are unaware they should change passwords and update firmware to protect their devices from these vulnerabilities.

## 7. Voice Commerce

If one-click checkout wasn’t easy enough, voice-enabled payments offered through Amazon Echo and others make it even easier to place online orders by merely speaking to an enabled device. While the Echo is currently limited to making purchases through the Amazon website, it’s reasonable to expect that soon the Amazon Pay platform will let customers use their Echo to make purchases at thousands of other merchants as well. And with an estimated future [$150 billion in voice transactions](https://cardnotpresent.com/voice-commerce-fraud-are-top-2018-trends-in-payments/), merchants must expect that fraudsters are already planning ways to attack this new sales channel.

## Fighting Payment Fraud Using a Comprehensive Approach

Juniper Research has found that retailers stand to lose [$71 billion globally from fraudulent card-not-present](https://finance.yahoo.com/news/juniper-research-retailers-lose-71-083000851.html) transactions in the next five years, which means e-commerce merchants must prepare for inevitable attacks.

Technology is evolving, so fraud protection must, too.

To stay on top of these trends, merchants should consider implementing a [robust fraud protection solution](https://blog.clear.sale/balancing-robust-fraud-prevention-with-seamless-online-shopping) that leverages a combination of sophisticated machine learning to quickly identify suspicious patterns plus advanced human intelligence to perform experienced risk assessments, all while delivering a fast and frictionless customer experiences that reduces the risk of payment fraud.

**When you’re ready to implement a solution that addresses the complexities of e-commerce today,**[contact a ClearSale analyst](https://www2.clear.sale/contact)**. We’ll show you how our hybrid approach can help you be smarter about — and better at — fighting fraud.**

## Frequently Asked Questions

### What is friendly fraud?

Friendly fraud happens when a cardholder files a chargeback on a purchase they forgot they made. These customers usually are not being deceitful, but the disputes still hit merchants hard.

### How does chargeback fraud differ from friendly fraud?

In chargeback fraud, the customer files a chargeback on a legitimate transaction to keep the product and get a full refund. The retailer loses the product, shipping costs, and high chargeback fees.

### Why does international ecommerce raise fraud risk?

Selling globally opens new markets and growth, but it also exposes retailers to new risks and expensive payment fraud. The article notes that global fraud losses were expected to keep climbing as cross-border sales expand.

### What is wire fraud in this context?

Wire fraud refers to fraud involving communications technology such as emails, text messages, and phone calls. Phishing is one of the best known examples because it works, with a large share of phishing emails getting opened.

### Why are mobile wallets and malware growing fraud concerns?

Mobile wallets such as Apple Pay and Visa Checkout handle a rising share of online purchases, and unsecured devices and weak passwords make credentials easy to steal. Malware has also become harder to detect, especially as poorly secured Internet of Things devices spread.

### What approach does ClearSale recommend against payment fraud?

ClearSale recommends a comprehensive solution that combines machine learning to spot suspicious patterns with experienced human risk assessment. The goal is to stop fraud while keeping checkout fast and frictionless for good customers.

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Source: [https://www.clear.sale/blog/7-trends-in-online-payment-fraud-e-commerce-merchants-need-to-know](https://www.clear.sale/blog/7-trends-in-online-payment-fraud-e-commerce-merchants-need-to-know)