Merchants each lose an average of $4.5 million per year to fraudulent online transactions, but nearly 40 percent of them say the cost of protection outweighs the cost of dealing with the losses, according to a new report. While most are committed to protecting online transactions, they are facing growing challenges exacerbated by digital transformation and Covid-19.
PayPal released the findings of a survey performed in partnership with the Poneman Institute as it launches a fraud system it will make available medium-sized businesses and enterprises that sell through digital channels. PayPal hopes the research will enable merchants to understand the current fraud landscape, barriers and challenges organizations face in mitigating the risk of online fraud and the resulting financial losses.
In The Real Cost of Online Fraud, Poneman found organizations’ ability to protect themselves against fraud has fallen during the pandemic. Prior to Covid-19, 45 percent of respondents rated their fraud prevention effectiveness as high or very high. Currently, only 34 percent rate themselves that way. And, 81 percent of fraud professionals polled feel their organizations are more vulnerable because of digital transformation initiatives.
The Poneman research also looks at how different organizations approach fraud prevention from the standpoint of technology, budgets, costs and how those costs break down into various fraud team activities.
“The number one challenge organizations are facing when it comes to preventing this rise in online fraud and risk is battling the increasing sophistication of fraudsters. This is followed closely by not having the right tools or practices in place to mitigate online fraud or achieve compliance with IT security and privacy regulations,” says Rahul Pangam, vice president of Risk Strategy at PayPal. “To help address these trends and the growing threat, PayPal has now launched Fraud Protection Advanced, an enhanced risk management solution for mid-market and enterprise businesses.”