Threats to e-commerce businesses during the holiday season
Over the past year, we have identified certain trends, including the way consumers make their online purchases. This has implications for how companies should respond to potential fraud and how they should protect their data. According to the Thuiswinkel Monitor, 58% of online consumers made at least one purchase via a smartphone in the first half of 2021. In general, smartphone purchases are more impulsive, which could cause consumers to overlook phishing attempts. According to Kaspersky research, there has been a significant increase in phishing attacks (208%) that mimic online payment pages this year.
As digital transactions become more of the norm, businesses are also feeling more vulnerable when it comes to fraud. Examples include “de-shopping”, which is the deliberate buying, using and then returning of products, and claiming that an order has not been delivered in an attempt to get the money back. We also continue to see retailers and SMEs in the Netherlands, among others, being targeted by identity fraud. Recently, there was another case where criminals pretended to be a certain company on Facebook, with the aim of extracting login details or data. This kind of impersonation also often leads to financial damage as well as severe reputation damage for organisations of all sizes.
The most important way for a company to protect itself and its consumers from fraud is to apply the right layers of security, without trying to cut any corners. Identity verification, such as the use of security questions, passport or driving licence checks and the use of unique passwords and PINs, is the best defense.
The future of payments
In the Dutch market, iDEAL has been the primary payment method in recent years. But earlier this year, we saw the economic impact of the coronavirus on the financial situation of individuals. In addition, we saw that more and more consumers choose to pay for their e-commerce purchases afterwards. Companies such as AfterPay and Klarna have been integrated with e-commerce systems and have become one of the most used payment methods by consumers.
Yet, the Thuiswinkel Monitor reports that in the first quarter of 2021, 96% of online consumers in The Netherlands will have paid for at least one purchase via iDEAL (+7% compared to 2020). Credit cards only account for 25% of payments, which partly explains the decrease in credit card fraud in 2021.
The decrease of one form of fraud, often means the increase of another. Therefore, it is important that online retailers and financial institutions are aware of new payment methods and how they are used, but also of the risks this can pose to them.
Financial institutions at risk
Emerce recently reported that the total damage due to bank wire fraud amounted to 16.5 million euros in the first six months of 2021 alone. Consumers do not only make online transactions, they also bank and check their financial status via digital platforms. The same applies to businesses, and financial institutions are at increased risk of fraud if they do not have a clear picture of what types of fraud are already in the market.