Is Online fraud: A global problem? Sure, we’re all familiar with the usual Nigerian scams, lottery scams, and online shopping scams. For the most part, many of us avoid those scams religiously. Yet, online fraud is a global problem that causes businesses to lose millions of dollars in revenue on a yearly basis. Here are three things you should know about this new threat to online commerce.
- No company is immune from online fraud.
This year, Leoni AG, Europe’s largest wire and electrical cable manufacturer, fell victim to a BEC (Business Email Compromise) scam. According to TechWorm, hackers used counterfeit company emails to hoodwink financial officers into transferring 40 million Euros to an Eastern European bank.
The scammers were successful because they had familiarized themselves with Leoni’s internal procedures for money transfers. So, who do BEC hackers target? Basically, any company that engages in global trade and regularly relies on wire transfers to conduct business. According to FraudWatch International, BEC scams have been reported in at least 79 countries (including the United States). Last year, BEC hackers stole $2.3 billion USD from unsuspecting companies.
- Online fraud is a growing trend.
According to Forbes magazine, Internet fraud continues to rise as more customers switch to mobile devices to shop for their favorite products. With the advent of online shopping, chargebacks have become a common occurrence. Honest customers who challenge suspicious charges on their accounts are often reimbursed their hard-earned cash by conscientious businesses, often without any questions asked. The adage that the customer is always right holds great sway. Unfortunately, the practice of benevolent chargebacks has led to what is called “friendly fraud” in the world of e-commerce. To date, almost 86% of chargebacks have proven to be duplicitous in nature.
- The hidden costs of online fraud can devastate a company’s bottom line.
It’s a no-win situation. To fight fraud, some merchants bypass proven automated systems for manual reviews. However, merchants who do this often incur substantial labor costs. According to PYMNTS, a small company spends almost $400,000 annually to combat online fraud, while a medium-sized merchant spends more than $800,000 annually to protect its bottom line.
Furthermore, fraudulent transactions often result in the loss of merchandise; companies cannot reclaim and resell lost products. Merchants are also entirely responsible for the $30-$100 chargeback fee per transaction. In all, online fraud can result in millions of dollars in lost annual revenue for businesses. It’s a devastating trend, and it’s time for merchants to take steps to protect themselves.