According to a recent report, retail eCommerce sales around are projected to grow to 6.54 trillion in 2022. But this immense growth comes at a cost, with an additional cost burden of $3.00 for every $1.00 in payment fraud paid by merchants, and the rate of chargebacks increasing by up to 20% each year, the potential backlash for e-commerce retailers could increase to nearly 1 trillion over the next five years. “Improving the customer experience has fueled the widespread adoption of eCommerce,” said Monica Eaton-Cardone, COO of Chargebacks911. “And with multi-channel options offering the vision of a friction-free checkout process, merchants need to pay equal attention to safeguard themselves from the backlash of fraud, an impact that, ultimately diminishes returns and significantly increases friction for everyone involved.”
To that end, Chargebacks911 has garnered a list of their predictions, highlighting six ways fraud will threaten businesses in 2020:
1. Open Banking Fraud: “As more banks open themselves up to third-party providers to spawn connectivity and data analysis for consumer customization, an uncharted territory emerges. Open access could lead to security breaches and multiple payment channels—leading to more fraud.”
2. BOPUS Fraud: “BOPUS (buy-online-pickup-in-store) is a popular eCommerce service we expect to lead to more fraud in 2020. Many locations don’t require consumers to show ID or a payment card at the time of the pickup. This results in the ecommerce original buyer filing a chargeback to the merchant and/or their card issuer, cutting into the merchant’s profitability and resulting in a product loss.”
3. Loyalty fraud. “Loyalty fraud occurs when a hacker gets into a consumer account and steals their loyalty rewards (like airline miles or hotel points). This converts to cash or equivalent to the affected consumer.”
4. “Concierge” Mentality: “Consumers ecommerce have largely rebranded card issuers as concierge services, catering to consumer demands for chargebacks without proper investigation or adjudication—and consequently issuers oblige for the sake of consumer loyalty. This bad behavior will continue into 2020 and beyond if this “blind-eye” approach continues to dominate.”
“One of the most important changes to the payments industry in 2020 will be whether we as an ecommerce industry disrupt the narrative that card issuers act as a concierge service,” adds Eaton-Cardone. “Changing business practices to protect assets is much easier than changing engrained consumer behavior.”
5. More Airline Problems: “There will likely be a spike in airline fraud and chargebacks, similarly to what was seen with the Thomas Cook airline collapse. Consumers are able to “double dip” their chargeback requests through their card issuer and insurance bonds or merchants (like Expedia or Orbitz).”
6. Subscription Service Surge: “More recurring subscription services are allowing for a “set it and forget it” customer mentality, which—you guessed it, leads to more chargeback requests. With the popularity and growing presence of subscription boxes and services, this isn’t going away anytime soon”.
Thus, as the eCommerce business looks to all but reinvent retail trade in 2020, everyone in the payments industry—from merchants to card issuers to acquirers—must prepare for the myriad of cyber threats that could profoundly threaten their profitability.
As for overarching industry predictions? Chargebacks911 has three:
1. Growth of Small Acquirers: “The pressure of PSD2 (the second revision of the EU’s Payment Services Directive) requires strong consumer authentication for all online purchases. Smaller acquiring banks can thus differentiate themselves with more directed attention to security and fraud detection measures.”
2. Increased Affiliate Relationships: “Just as subscription box services continue to grow, affiliate relationships will also increase in 2020. Major card issuers and brands will come together to maximize synergistic results and promote loyalty through consumer rewards.”
3. Telepathic Payments: “Well…why not?!”
Eaton-Cardone added a final prediction, which she states is already happening, “[My prediction is that] the industry will see more internally-built transaction scoring solutions and LESS reliance on ‘industry’ security-checking mechanisms. Innovation in post transaction analysis will keep retail eCommerce expanding to meet the consumer growth and propel the economy.”