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Fraud Consumes U.S. Online Commerce With An Appetite For Apparel

Lane Leskela

In our continuing saga on the wide world of large-scale fraud schemes, enter the invisible army of online commerce operators with the motivation and ability to steal consumer credit accounts and to create new accounts. One of their current objectives is to commit fraud by buying clothes and shoes and accessories to resell or to receive illegal chargebacks.

In fact, the apparel industry suffered a whopping 70% year-on-year increase in U.S.-based fraud attacks in 2016. This is according to new research that examines online fraud activity from the e-commerce fraud prevention provider Forter together with the Merchant Risk Council.

Let’s take a closer look at the results of the research, and examine what businesses can do to protect themselves from the growing threats.

Forter’s 2016 Fraud Attack Index

Israel-based Forter looked at data on more than 136 million transactions to compile its 2016 Fraud Attack Index, revealing a 79% increase in fraud incidents for U.S. domestic retail orders when comparing Q4 2015 to Q4 2016. Interestingly, online fraud attempts on international orders in Q4 2016 decreased by 13% when compared to incidents recorded in the same period in 2015. Nevertheless, fraud activity in online retail orders from outside the U.S. were 62% higher than in domestic orders during the fourth quarter of 2016.

Impact of EMV adoption

According to fraud research analysts at Forter, after the October 2015 adoption of EMV (microchip) credit cards in the United States, a rise in the number of domestic fraud attacks on online commerce sites was anticipated. As hoped, U.S.-based operators were negatively affected by not being able to easily copy the necessary data from physical cards. However, domestic fraudsters then shifted to increase their online pursuits, dramatically boosting domestic CNP (card not present) fraud activity last year.

Increase in online payment hacking

The 2016 Forter report noted an alarming upward trend in the Account Takeover (ATO) domain. Fraud operators have also shifted focus from “Merchant ATO” (breaking into accounts managed on the seller’s website in order to masquerade as returning customers) to “online payment ATO” (hacking into customer accounts managed by online payment services including PayPal, Apple Pay, Google Pay, and Amazon Payments).

Thus Merchant ATO activity, which was on the rise in 2015, actually decreased last year. However, this represented a shift in account targeting by type rather than indicating an overall decrease in activity. The 2016 Fraud Attack Index reveals a 131% increase in all ATO attempts against U.S. online payment accounts.

Online payment fraud prevalent in apparel, with a 69% increase

Evaluating the online payment fraud differences between retail categories, Forter analysts also published the year-on-year percentage increases or decreases in fraud attacks for specific product verticals:

  • Apparel – 69% increase
  • Food and beverages 49.8% increase
  • Electronics – 1.8% decrease
  • Luxury goods – 8.4% decrease
  • Digital goods – 22.6% decrease
  • Travel & hospitality – 33% decrease

With an increase of nearly 50% over 2015, Forter’s data reveals that the food and beverage trade has also seen a dramatic increase in online fraudulent payments in the past year. As the five-quarter graphical analysis shows, the apparel industry remains under the threat of online fraud more than any other U.S. retail sector. Some of the contributing factors include widening deceptive buying practices and the large and growing market for stolen credit card information.

Forter’s report also warns online merchants and consumers that botnets are becoming increasingly popular with fraud players due to their ability to increase both the scale and reach of online attacks.

What to do

Fortunately, solutions are available that can help detect fraudulent activity and to prevent losses due to payment fraud. These solutions can:

  • Help customers reduce fraud-related financial losses by screening multiple payment scenarios while providing increased security for transactions in key business processes
  • Capture and analyze high volumes of transaction data from multiple sources and provide real-time detection to help quickly identify and halt fraud activity
  • Stop payment processing in real time on transactions that are associated with revealed fraud patterns
  • Offer prebuilt rules for fraud detection – for example, identifying customers located in high fraud-risk countries, and screening full customer addresses against politically exposed persons (PEP) lists
  • Prevent open access to identifying customer data and improve protection against sensitive information misuse
  • Mask sensitive data-capture fields before field values are handed over to a user interface

Learn more

Learn more about SAP solutions for fraud management and UI masking. Read the other blogs in our GRC series.

This article, GRC Tuesdays: Fraud Consumes U.S. Online commerce with an Appetite for Apparel, originally appeared on the SAP BusinessObjects Analytics blog and has been republished with permission.

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About Lane Leskela

Lane Leskela is global business development principal, Governance, Risk and Compliance, at SAP.

Survey: Mobile Payments Can Boost Growth And Profitability

Tom Groenfeldt

Companies that accept mobile payments are growing faster and more profitably than companies that don’t, according to a recent study done for NTT Data.

The fastest-growing companies are also the most likely to accept mobile payments, according to the global survey of 2,300 companies and consumers conducted by Ingenico ePayments, Oxford Economics, and Charney Research. It found that among business respondents with annual revenue growth of 11% or more, 43% have an app that supports purchases and payments, compared with 32% of slower-growth businesses.

Peter Olynick, retail banking senior practice lead for NTT Data, said the survey showed what he was expecting to see. “For a while, there has been this sense that mobile payments are just around the corner.” But companies have been hesitant, often over security concerns, he said. He found the correlation of growth and acceptance of mobile payments interesting.

“It seems that a lot of executives were more conservative about the rate of change than we have started to see among consumers. We see more places that can accept some of these newer payment types and more people pulling out their phone than last year.”

He probably doesn’t go a day without using Android Pay, Olynick said. The point-of-sale delays of the EMV chip cards contribute to the interest in mobile payments, he added. “Some of our own research, plus anecdotal information, shows frustration level over the amount of time EMV takes.”

Looking into the future, the survey found consumers expect their use of cash to drop faster than business executives are planning. “A lot of people think they will be using a lot less cash in the near future and executives are more conservative. Consumers thought they would use 32% less cash and execs were thinking it would be five percent–that’s a pretty big difference.”

Drawing on his own experience again, Olynick said he used to go to an ATM once a week; now he often won’t go for a month, and then it’s mostly to get cash for tips; otherwise he pays by card or phone.

He expects a continued move to general-purpose cards, with a handful of private-label cards like Starbucks or Dunkin Donuts, and more use of general purpose cards like Visa or Mastercard for everything else. “We don’t want to make payments to 55 different places; general-purpose cards have a real value.”

A key lesson from the survey is that retailers profit when they remove friction from the buying process, he said. “Anytime you can remove the friction of the payment, we are seeing those companies are getting a nice uplift. If you walk into a retailer and pick up one or two things and there is a line at checkout, you put it down and walk out because you don’t have the 15 minutes it will take for that queue to open up. When we can get to the point where the payment itself is frictionless, we will get those sales that have been lost. We are very high on the idea that removing that friction, such as Uber, or just making it easier and a little bit faster to get through the line,  all those things are going to make it positive to the retailers who do it best.”

In the survey, cryptocurrencies showed up in a way: 8% of businesses that accept mobile payments also accept cryptocurrencies.

Even that may overstate the case. Chris Skinner, in his recent book Value Web, interviews Jeffrey Robinson, author of BitCon: The Naked Truth About Bitcoin. Robinson says that companies that accept payments in bitcoin really only allow customers to pay in bitcoin, and then they immediately route the payments through Coinbase or BitPay. “Allowing a customer to pay with bitcoin is not an endorsement of bitcoin, it’s a marketing ploy,” he told Skinner.

The survey also found that companies that sell internationally grow faster. “Among companies with annual profit growth of 11% or better, 56% sell to international markets, compared with 44% of their slower-growing counterparts.” Payment guarantee companies like Forter, Signifyd, and Radial make it easier and safer for companies to accept cross-border electronic payments.

Developing countries are eager users of mobile payments – 58% of consumers in developing countries make mobile payments at least once a week, compared with only 39% in developed countries, the survey found, with Kenya and China leading in active use of mobile.

For more on pleasing your customers, see Customer Experience: OmniChannel. OmniNow. OmniWow.

This article originally appeared on Forbes.com. It is republished by permission.

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Sink Or Swim In ‘17: Embracing The Mobile Mind Shift Keeps You Afloat, Part 2

Erin Giordano

Part 2 of a series. Read Part 1.

What’s the biggest opportunity for finance leaders in 2017? During a recent webinar, Forrester Research VP and principal analyst Paul Hamerman said, “There is an opportunity to use technology to lessen the burden of managing expenses, risk, and compliance activities so that finance [leaders] can be more involved in the strategic side of the business, that is, helping the business grow, innovate, and serve its customers.”

So what’s holding finance leaders back? The burden of managing risk and compliance issues and expense activities are the biggest culprits.

In a new Forrester study of 500 global finance decision makers, respondents revealed that 76% of their time is spent on less strategic activities, such as managing risk and driving compliance, as well as expenses.

 

Source: Harnessing the power of modern T&E tools for strategic financial management

How can finance leaders change this? While this finding may not be surprising to many, as this has been roadblock for many years, finance leaders can now change this by carefully assessing their current travel and expense processes and inefficiencies by modernizing them with technology. For example, T&E modules in conventional on-premise ERP software limit mobile functionality and are not integrated with travel booking systems or data.

By modernizing T&E business processes and using technology that offers an open platform, CFOs and their teams will have more bandwidth to spend time on more strategic activities. Also, modernizing this process will enable employees to become better equipped to spend reasonably and track expenses properly. As the Forrester study states, “While the CFO is ultimately responsible for managing employee-generated spend, improving these processes can help empower individual users to better manage budgets and expenses. This ends up benefiting both the individual users and the business.”

Learn more
Listen to Hamerman speak on this topic: Harnessing the power of modern T&E tools for strategic financial management

Download this Forrester Consulting thought leadership paper: Financial Leaders Must Embrace T&E Solutions Strategically to Drive Growth and Innovation

Follow SAP Finance online: @SAPFinance (Twitter)  | LinkedIn | FacebookYouTube

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Erin Giordano

About Erin Giordano

Erin Giordano is senior marketing manager, Enterprise for Concur, and has held various strategic positions that have helped global companies succeed in their thought leadership and business expansion efforts. Her areas of expertise range in topics from duty of care to global mobility spanning multiple industries.

How Emotionally Aware Computing Can Bring Happiness to Your Organization

Christopher Koch


Do you feel me?

Just as once-novel voice recognition technology is now a ubiquitous part of human–machine relationships, so too could mood recognition technology (aka “affective computing”) soon pervade digital interactions.

Through the application of machine learning, Big Data inputs, image recognition, sensors, and in some cases robotics, artificially intelligent systems hunt for affective clues: widened eyes, quickened speech, and crossed arms, as well as heart rate or skin changes.




Emotions are big business

The global affective computing market is estimated to grow from just over US$9.3 billion a year in 2015 to more than $42.5 billion by 2020.

Source: “Affective Computing Market 2015 – Technology, Software, Hardware, Vertical, & Regional Forecasts to 2020 for the $42 Billion Industry” (Research and Markets, 2015)

Customer experience is the sweet spot

Forrester found that emotion was the number-one factor in determining customer loyalty in 17 out of the 18 industries it surveyed – far more important than the ease or effectiveness of customers’ interactions with a company.


Source: “You Can’t Afford to Overlook Your Customers’ Emotional Experience” (Forrester, 2015)


Humana gets an emotional clue

Source: “Artificial Intelligence Helps Humana Avoid Call Center Meltdowns” (The Wall Street Journal, October 27, 2016)

Insurer Humana uses artificial intelligence software that can detect conversational cues to guide call-center workers through difficult customer calls. The system recognizes that a steady rise in the pitch of a customer’s voice or instances of agent and customer talking over one another are causes for concern.

The system has led to hard results: Humana says it has seen an 28% improvement in customer satisfaction, a 63% improvement in agent engagement, and a 6% improvement in first-contact resolution.


Spread happiness across the organization

Source: “Happiness and Productivity” (University of Warwick, February 10, 2014)

Employers could monitor employee moods to make organizational adjustments that increase productivity, effectiveness, and satisfaction. Happy employees are around 12% more productive.




Walking on emotional eggshells

Whether customers and employees will be comfortable having their emotions logged and broadcast by companies is an open question. Customers may find some uses of affective computing creepy or, worse, predatory. Be sure to get their permission.


Other limiting factors

The availability of the data required to infer a person’s emotional state is still limited. Further, it can be difficult to capture all the physical cues that may be relevant to an interaction, such as facial expression, tone of voice, or posture.



Get a head start


Discover the data

Companies should determine what inferences about mental states they want the system to make and how accurately those inferences can be made using the inputs available.


Work with IT

Involve IT and engineering groups to figure out the challenges of integrating with existing systems for collecting, assimilating, and analyzing large volumes of emotional data.


Consider the complexity

Some emotions may be more difficult to discern or respond to. Context is also key. An emotionally aware machine would need to respond differently to frustration in a user in an educational setting than to frustration in a user in a vehicle.

 


 

download arrowTo learn more about how affective computing can help your organization, read the feature story Empathy: The Killer App for Artificial Intelligence.


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About Christopher Koch

Christopher Koch is the Editorial Director of the SAP Center for Business Insight. He is an experienced publishing professional, researcher, editor, and writer in business, technology, and B2B marketing. Share your thoughts with Chris on Twitter @Ckochster.

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In An Agile Environment, Revenue Models Are Flexible Too

Todd Wasserman

In 2012, Dollar Shave Club burst on the scene with a cheeky viral video that won praise for its creativity and marketing acumen. Less heralded at the time was the startup’s pricing model, which swapped traditional retail for subscriptions.

For as low as $1 a month (for five two-bladed cartridges), consumers got a package in the mail that saved them a trip to the pharmacy or grocery store. Dollar Shave Club received the ultimate vindication for the idea in 2016 when Unilever purchased the company for $1 billion.

As that example shows, new technology creates the possibility for new pricing models that can disrupt existing industries. The same phenomenon has occurred in software, in which the cloud and Web-based interfaces have ushered in Software as a Service (SaaS), which charges users on a monthly basis, like a utility, instead of the typical purchase-and-later-upgrade model.

Pricing, in other words, is a variable that can be used to disrupt industries. Other options include usage-based pricing and freemium.

Products as services, services as products

There are basically two ways that businesses can use pricing to disrupt the status quo: Turn products into services and turn services into products. Dollar Shave Club and SaaS are two examples of turning products into services.

Others include Amazon’s Dash, a bare-bones Internet of Things device that lets consumers reorder items ranging from Campbell’s Soup to Play-Doh. Another example is Rent the Runway, which rents high-end fashion items for a weekend rather than selling the items. Trunk Club offers a twist on this by sending items picked out by a stylist to users every month. Users pay for what they want and send back the rest.

The other option is productizing a service. Restaurant franchising is based on this model. While the restaurant offers food service to consumers, for entrepreneurs the franchise offers guidance and brand equity that can be condensed into a product format. For instance, a global HR firm called Littler has productized its offerings with Littler CaseSmart-Charges, which is designed for in-house attorneys and features software, project management tools, and access to flextime attorneys.

As that example shows, technology offers opportunities to try new revenue models. Another example is APIs, which have become a large source of revenue for companies. The monetization of APIs is often viewed as a side business that encompasses a wholly different pricing model that’s often engineered to create huge user bases with volume discounts.

Not a new idea

Though technology has opened up new vistas for businesses seeking alternate pricing models, Rajkumar Venkatesan, a marketing professor at University of Virginia’s Darden School of Business, points out that this isn’t necessarily a new idea. For instance, King Gillette made his fortune in the early part of the 20th Century by realizing that a cheap shaving device would pave the way for a recurring revenue stream via replacement razor blades.

“The new variation was the Keurig,” said Venkatesan, referring to the coffee machine that relies on replaceable cartridges. “It has started becoming more prevalent in the last 10 years, but the fundamental model has been there.” For businesses, this can be an attractive model not only for the recurring revenue but also for the ability to cross-sell new goods to existing customers, Venkatesan said.

Another benefit to a subscription model is that it can also supply first-party data that companies can use to better understand and market to their customers. Some believe that Dollar Shave Club’s close relationship with its young male user base was one reason for Unilever’s purchase, for instance. In such a cut-throat market, such relationships can fetch a high price.

To learn more about how you can monetize disruption, watch this video overview of the new SAP Hybris Revenue Cloud.

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