Card-Not-Present (CNP) fraud in the United Kingdom is on the rise, according to a report by industry group Financial Fraud Action. After an initial surge following the introduction of EMV to the UK in 2008 (a trend played out in many countries and likely to hit the United States in October 2015), CNP fraud slowly fell for a number of years as the industry worked hard to combat the threat from fraudsters.
However, according to the report, CNP fraud losses in the UK reached £331.5 million in 2014 – a rise of 10% compared to 2013. Based on value, CNP fraud accounted for almost 70% of all card fraud in the UK last year. It’s a worrying trend and one that unfortunately may not go away anytime soon, with ecommerce in Europe growing at close to 20% per year. Total European ecommerce revenues are predicted to be €185.39 billion for 2015, providing an enticing prospect for any would-be fraudster.
Counterfeit fraud also grew 10% between 2013 and 2014, costing £47.8 million in losses, while card ID theft contributed £29.9 million during the same period. While these remain important problems to address, they are still dwarfed by the £331.5 million lost through CNP fraud in 2014. This remains the most significant problem facing merchants today.
As ecommerce continues its dramatic expansion in Europe and consumers shift their spending from traditional in-store purchases to online, merchants are also increasingly exposed to the threat of chargebacks and chargeback fraud. Known as ‘friendly fraud’, the problem is also harder to identify as it is perpetrated by a ‘typical’ customer rather than a criminal gang. Up to 86% of chargebacks are fraudulently placed and 40% of consumers who file a fraudulent chargeback will do it again within 60 days, according to Visa.
Only by talking about friendly fraud and being more transparent can we raise awareness of this problem and help combat the negative effects of chargebacks. A simple step that all merchants can make today is to manage customers in a more personal manner, resolving issues quickly and efficiently and keeping records that will help reduce unnecessary chargebacks. Otherwise, as we have seen from the latest fraud statistics, the problem will continue to be a significant cost to both online retailers and genuine customers.
