CYBER FRAUD IMPERILS PHL DIGITAL ECONOMY
FRAUD attacks threaten the e-commerce sector— which has been gaining more footing in the Philippines amid the pandemic—but a digital expert warned these do more harm than just revenue losses.
The recent surge in e-commerce transactions and spending has prompted an “aggressive increase” in cyber attacks globally, Vesta Asia Pacific General Manager Shabab Muhaddes told the Businessmirror.
Vesta, a global fraud detection company, noted that payment fraud attempts in the Southeast Asian region are 12 times more than the global average. This has resulted in online merchants losing an average of 1.6 percent in their revenues annually.
“While direct fraud loss—the amount that was fraudulently used for the purchase—makes up a significant component of the total cost of fraud, it’s also the catalyst for loss in other operational areas of their business,” Muhaddes stressed.
The Vesta official is referring to consumer trust and brand reputation, which can take a hit because of the fraud attacks. The consumers, he said, may see the online payment options as not secured because of the cyber threat.
“Not only will consumers refuse to interact with the SMES [small and medium enterprises] and online retailers in the future, they are also likely to tell others about their experience. This can quickly result in a significant amount of lost revenue,” he explained.
Card-not-present (CNP) scam is among the common types of payment fraud the SMES and online retailers have to deal with, Muhaddes said.
This refers to illegal purchases on e-commerce platforms using stolen payment information, he explained. CNP fraud, as suggested by the term, may take place even without physical cards.
Another payment fraud cited by the Vesta official is account takeover, which is a form of identity theft.
“A successful account takeover attack leads to fraudulent transactions and unauthorized shopping from the victim’s compromised account,” he said, noting that a fraudster, in this case, illegally obtains access to bank, e-commerce site or mobile wallet accounts.
To address the payment fraud, retailers may opt to bring in an in-house fraud team to review the transactions. Muhaddes said this could lead to “very inefficient processes and poor decisioning,” in addition to increasing operational costs.
He also pointed out that increasing security, on the other hand, may also result in more incidents of false declines.
“False declines occur when legitimate transactions are denied. When this happens, a customer is likely to abandon their cart, and/ or never return, leading to lost revenue,” he explained.
To better handle cyber security, Muhaddes said the companies need to understand the fraud and acceptance rates, which a technology partner can help them with.
“Work with technology partners that can calibrate in real-time between good and bad transactions, drawing on trillions of data points, leveraging behavioral, device, and fraud link analysis to improve performance,” he explained.
In a recent report, Ernst & Young Global Ltd. (EY) shared that the digital ecosystem in Southeast Asia is seen to generate revenue opportunities amounting to $23 billion by 2025.
EY Asean Regional Managing Partner Liew Nam Soon said that the growth of start-ups and digital natives offering interconnected services—including ride-hailing, food delivery, grocery, logistics and financial services—will support the regional bloc’s digital ecosystem.