Companies operating within the payments industry are predicted to lose billions to online payment fraud over the next four years, according to a new study.
The report from Juniper Research suggests that businesses in the eCommerce, airline ticketing, money transfer and banking services sectors will cumulatively lose more than $200 billion (£154.3 billion) in online payment fraud by 2023, driven by the increased sophistication of fraud attempts and the rising number of attack vectors.
The research, Online Payment Fraud: Emerging Threats, Segment Analysis & Market Forecasts 2020-2024, recommended that payments industry stakeholders focus on an omni-channel fraud approach, with strict cyber-security and machine learning analytics, to mitigate the challenges they face.
Machine learning was identified as an essential tool in fraud prevention because it allows those in the industry to analyse transaction flows and develop insights into fraudulent behaviours.
Researchers at Juniper suggest that the incorporation of machine learning into fraud detection and prevention software will see spending reach $10 billion (£7.7 billion) by 2024, a 15 per cent increase on 2020.
In 2019, Open Banking Expo interviewed several key industry figures about the size of the threat. Some of those interviewed, stressed there was a need to be measured about the scale of the risk.
“Security has been very well thought through in the construction of the infrastructure of Open Banking and I’m confident that within the transaction there is security,” Mike Haley, managing director at fraud prevention service Cifas, said at the time.
“It may well be that the fraud risk lies at the on-boarding of customers at the third-party processor (TPP) – identity fraud has increased over the last 10 years, it is now 50-60 per cent of all instances of fraud that we see at Cifas.”
The latest research from Juniper found that digital money transfer is one specific area where companies should be particularly vigilant, with losses projected to grow by 130 per centage points over the next four years.
Digital money transfer fraud is particularly strong in emerging markets, with payments vulnerable to SIM swapping fraud and synthetic identities, with less robust security measures in place.
In this area, the research recommended enhanced ‘Know Your Customer’ verification, including events-based re-verification following onboarding, as essential tools to secure the rising levels of digital transactions.
“The rapidly evolving nature of payment fraud and increased sophistication in attack methods requires machine learning adoption at scale, in order to minimise risk, said research co-author, Nick Maynard.
“Constant innovation in analytics and data models is increasingly essential to constraining fraudulent behaviours in payments”.