Does your company need to learn how to avoid online fraud?
It’s important to consider the various ways your company can prevent fraudulent
Internet transactions because it can provide several benefits for your company.
How important is it? In fact, one of the main benefits of
preventing online fraud is that it can save your company a ton of money. This
is certainly a plus regarding your company’s financial health. You might be
surprised about the high costs of fraud regarding how to avoid online fraud.
In fact, studies show that the cost of fraud is a sky-high
7.6% of online companies’ total revenue. Depending on the size of a company’s
yearly revenue that figure could be in the millions of dollars. The study also
showed that companies rely too much on a username/password.
The study was done last year, so the results are relevant
regarding Q1 2017 not being over yet. There are several causes of the high
costs of fraud. They include chargeback losses, false positives, and other
factors. This highlights the need to focus on how to avoid online fraud.
The report was published in October 2016. The findings also
include an online study that was done in June 2016, which included 500
e-commerce merchants that have year sales of at least $1 million.
The average amount of funds that the companies spent yearly
on fraud prevention was $14.6 million. That includes 7.6% of both
online/offline sales. About three-quarters of the expenditures were for fraud
management software, 19% was from false positives, and 7% was due to
chargebacks.
The bottom line is that companies should focus more on how
to avoid online fraud. There’s a certain amount of fraud that’s to be expected
but nearly 8% of a company’s yearly revenue is quite a high price tag for fraud
prevention.
The company that conducted the study reported that the
figure was quite high. This is especially due to the issue of the opportunity
cost. The funds that the companies spend on fraud protection could have spent
on its core business, for example. This is why it’s critical to figure out how
to avoid online fraud.
In fact, the conductors of the study reported that the
findings showed a fraud environment that was “very aggressive.” That’s
especially true among online companies.
The company recommended that companies use more
fraud-battling tools that check the customer’s device, purchase activity, and
behavior. There are various options including fingerprinting, which uses data
for identifying individual smartphones, tablets, or PCs. This is done to verify
the identity of a shopper. These elements are tougher for criminals to
overcome.
The company also argued that retailers shouldn’t rely as
much as they do on various data elements that are static on. The reason is the
security code located on the back of the credit/debit card. Another major
benefit is that geolocation as well as device fingerprinting doesn’t need much
effort from customers.
These are some of the main issues related to the
cost-effectiveness of learning how to avoid online fraud.
