Online payment fraud losses to exceed $206 billion, driven by identity theft
Online payment fraud losses are expected to exceed $206 billion over the next five years and will be driven by identity fraud, according to new research.
A new study from Juniper Research has found that merchant losses to online payment fraud will exceed $206 billion cumulatively for the period between 2021 and 2025.
According to Juniper, this figure, equivalent to almost 10 times Amazon's net income in the 2020 financial year, demonstrates why merchants must make combatting fraud, through the use of machine learning-based fraud prevention platforms, an immediate priority.
The research identified that the pandemic has led to a surge in synthetic identity and account takeover fraud, which threaten the security of entire accounts, alongside associated payment data. The research recommends payment fraud detection vendors focus on partnering on data agreements now, to maximise the data available to machine learning algorithms; boosting chances of identifying fraudulent transactions.
Remote Physical Goods Are Leading Fraud Area of Concern
The new research, Online Payment Fraud: Emerging Threats, Segment Analysis - Market Forecasts 2021-2025 Market Research, found that remote physical goods purchases are the leading cause of online payment fraud; accounting for over 47% of fraud losses in 2021. The research urges payment fraud prevention vendors to offer services based on digital identity verification, to boost security and combat the surge in account takeover fraud.
"Given the large amounts of online payment transactions globally, it is essential that this transactional data is leveraged to continually detect fraudulent transactions," says research co-author Nick Maynard.
"Payment providers who can use this data to identify new fraud sources and tactics will be those who prove to be the most resilient to this significant market loss," he says.
Unprecedented Fraud Risks Leading to Increased Detection Spending
The research also found that spending on fraud detection and prevention platform services will exceed $11.8 billion globally in 2025, from $9.3 billion in 2021.
Accordingly, the research recommends that fraud detection and prevention vendors focus on building platforms that can cover all the emerging channels of payment traffic.
This includes new areas such as open banking payments, supported by data partnerships, and backed by large-scale machine learning, to achieve the best outcomes.
Juniper Research's latest Online Payment Fraud research provides an extensive analysis of how the online payment fraud space is evolving, in reaction to changing fraudster tactics, as well as the impact of the COVID-19 pandemic on the digital ecosystem. This includes how the continued intensification of fraudsters' efforts is creating opportunities for fraud prevention service providers.
The research report assesses how the landscape is changing in online fraud, with a focus on new fraud types and how fraud detection and prevention vendors can mitigate these. The research positions 17 fraud detection and prevention vendors in a Juniper Research Leaderboard. The research also includes an extensive forecast suite, which includes fraud detection and prevention spend, as well as online payment fraud values.
