Why E-Commerce Growth Is Leaving More Retailers Vulnerable to Fraud

This season, more consumers are choosing to click their way through their holiday shopping lists. E-commerce sales are expected to grow from 14% to 18% and account for nearly 60% of all transactions, according to Deloitte’s 2019 holiday shopping survey. Smartphone use for holiday shopping is expected to rise 6%.

But as some consumers and retailers are learning the hard way, the growth of online and mobile shopping opens up more opportunities for fraud. Last year, for instance, an estimated 14.4 million people fell victim to identity theft at a staggering cost of $1.7 billion (a figure that has more than doubled since 2016), according to Javelin Strategy & Research. And that number is only expected to swell as more shoppers embrace the convenience of shopping from their digital devices.

To protect their customers from the escalating threat of malicious and fraudulent activity, retailers need to take important steps to beef up their online security standards, according to Jason Tooley, biometrics expert and chief revenue officer at Veridium.

“Without a doubt, this latest influx of Christmas sales will be a bonus for U.S. retailers. However, with the sharp increase in online transactions, half of which are now on mobile [devices], digital security for customers must become a top business priority,” Tooley said. “If customers do not feel safe purchasing online, retailers will face abandoned baskets and customer churn. Businesses must embrace changing consumer habits and respond to the needs of the digitally savvy, mobile-first customer, with security and convenience being the most coveted assets.”

Most importantly, retailers need to implement multiple levels of authentication. Tooley recommends a shift away from “what you know” techniques such as easily forgotten and easily compromised passwords toward “who you are” tools. These can include mobile device possession and fingerprint or facial recognition techniques, which create a combination of explicit and implicit authentication.

“Incorporating implicit intelligence, such as cutting-edge behavioral biometrics which uses artificial intelligence to identify learned behavior and anomalies, will be the final frontier in reducing fraud and delivering the highest level of security,” Tooley noted.

Tooley said retailers must analyze the digital expectations of their customers and intelligently apply different factors of authentication based on the customer scenario. “This password-less approach increases security without the associated costs,” he explained.

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