Merchants could lose $71 billion to card-not-present fraud over the next five years, and North America, the Far East and China will soon account for 80% of that fraud, according to new data from Juniper Research.
The U.S. shift to EMV cards and delays in 3D-Secure are big reasons for the rise, the company said.
“Many merchants still perceive combatting fraud as too expensive. Consequently, they have been ill-prepared to deal with the shift to online fraud following the introduction of EMV (CHIP and signature) payment cards in the USA,” it noted in a press release about the findings.
After the October 1, 2015, EMV liability shift in the United States, retailers and other merchants became financially liable for any counterfeit fraud losses associated with debit and credit cards present at the time of the transaction. A similar shift in fraud liability is set to occur at ATMs and gas pumps.
However, recent data from The Strawhecker Group, an Omaha, Nebraska-based electronic-payments management consulting firm, said only 65% of U.S. merchants had an EMV terminal and just 52% of U.S. merchants had an activated or certified EMV terminal.
The clamp-down on the use of fake plastic in transactions where cards are physically present at checkout has prompted many criminals to move into card-not-present (CNP) fraud, which usually involves buying things online with stolen card data instead.
Things such as new 3D-Secure technology, which lets shoppers assign passwords to their cards, can be one way to help verify legitimate online transactions and give merchants some liability protection against fraudulent purchases. Juniper Research said delays in the roll-out of that technology will help fuel the growth of CNP fraud in the next five years, however.
“Click-and-collect” fraud will also be a major driver of CNP fraud, Juniper Research said. Click-and-collect fraud occurs when criminals use stolen card information to buy goods online and then have those goods delivered to a local retailer for pick-up. The arrangement lets criminals avoid providing a physical address.
“Meanwhile, retailers are reluctant to impose rigorous ID checks on pick-up for fear of damaging the consumer experience and reducing conversion rates,” the study noted.
Juniper Research forecasted that the sales of fraudulent card-not-present physical goods will hit $14.8 billion a year by 2022.
The company also said its cost analysis of fraud detection and prevention solutions indicated that merchants that invested in the solutions could come out ahead in most instances, however.
Machine learning and a shift to mobile e-commerce, which will rely more on 3D-Secure and biometrics, will be key battlegrounds, Juniper Research said.
Study author Steffen Sorrell said 2018 will herald the arrival of new tools in the fight against fraud.
“3DS 2.0 will finally begin to rollout and will mark a paradigm shift in terms of merchants and issuers leveraging shared data,” he noted. “We also expect passive biometrics, such as the manner in which a device is handled, to become key in the future.”
