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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.

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

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Lane Leskela

About Lane Leskela

Lane Leskela is Global Business Development Principal, Governance, Risk, Compliance and Security at SAP.

China Leads On Mobile Wallets — Will Others Follow?

Tom Groenfeldt

Mobile wallets have taken off faster in China than in the U.S., concluded a recent Forrester Research study. It found that 76% of metro Chinese consumers use mobile wallets or are interested in doing so, compared with only 36% of the urban online U.S. population.

The past influences the future, and as a fast-developing country, China has not had the payments infrastructure and regulatory legacy that developed in the U.S., said Brendan Miller, a principal analyst at Forrester.

“Incumbency is a factor. We have the highest penetration and usage of credit cards in the world, plus high debit card usage. As you go into other countries you will find they have alternative or local payment options, so consumers are used to using these methods like direct debit from a checking account and they avoid a lot of the credit card and interchange fees we have.”

Asia has smart cities and well-developed networks that are simpler than those in the U.S., where multiple levels of government make integration of payments and services more complicated.

Asia’s mobile wallet providers have the potential to gain the understanding of customers that department stores used to enjoy before the big brands replaced many store cards. “Nordstrom,  Kohl’s, Macy’s, Sears — all those retailers had their own private label credit cards for years and years,” Miller noted. “They provided a way of getting a better understanding of what consumers were buying, and a way to avoid credit card and debit interchange fees.”

The rise of Alipay and WeChat in China has been driven by the value the services provide for consumers. “First they made it super convenient for consumers to buy, and then they layered on additional services that consumers found engaging, such as gamification and the idea of sending gifts on the Chinese New Year — red envelopes — that got people engaged with the system.”

In the U.S., payments systems have made it convenient, but that’s the lowest rung on the ladder, Miller added. “Mobile wallet providers will have to up their game.”

Mobile payments with NFC have the potential to be faster than EMV, which Forrester expected would drive mobile payments. Miller said that when he presented to a group of retailers last year, they told him that hasn’t been the case. “Retailers haven’t updated their terminal logic. So when you pay with NFC you should be able to tap and have transaction process immediately. Instead, I get prompted for my debit PIN or a signature because the POS is using the old terminal logic and not running NFC.”

If a buyer provides a thumb scan in Apply Pay, no additional identification should be needed. “But it is going to take a while for retailers to reprogram those terminals to improve the flow at checkout.”

Retailers have been preoccupied with getting EMV to work right that they haven’t focused on the user experience with NFC, he added. “Right now NFC is not that much more convenient, and meanwhile EMV is getting faster. Visa and Microsoft have done a lot to speed those up.”

The Forrester study predicted mainstream mobile wallets in the U.S. will add customer engagement features. The Chinese may provide some examples.

Miller said that Alipay has made some announcements of partnerships with American payment processors, primarily with a focus on targeting Chinese consumers within the U.S., such as pushing adoption in place where Chinese consumers visit. The Chinese payment companies may have the potential to reach beyond the Chinese markets, he said, but the attitudes of U.S. consumers will be different from the Chinese. “This is all harder that anyone thinks is it. Everyone is disappointed by Apple Pay or Android Pay adoption. This is going to take time; payments is hard to do.”

Consumers won’t bother with mobile wallets until they see some extra value beyond what cards or cash can offer, like the ability to order ahead at Starbucks or Dunkin Donuts, or get recommendations or coupons while shopping. Alipay and WeChat have evolved into lifestyle platforms for Chinese consumers. Miller predicts space will open in the U.S. for third-party providers like Apple, Facebook, and Google that could merge their other customer engagement tools with a mobile wallet.

For more on this topic, see Survey: Mobile Payments Can Boost Growth And Profitability.

Twitter @tomgroenfeldt

Image: AP

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Oxford Economics Research: Leading CFOs Have Become Real-Time Guides For The Entire Company

Neil Krefsky

The interim results from the latest Oxford Economics global survey of CFOs and finance executives are just in. With over 750 already interviewed – and another 750 to be interviewed in the coming weeks – one thing is crystal clear: Top CFOs are leading in the boardroom. They have become real-time guides that drive business strategy across the enterprise. But there is a big difference between leaders and laggards: The top CFOs use pioneering technology and Big Data to collaborate effectively with every function in the business and deliver the operational and strategic insights they need to be successful.

Finance has arrived

At nearly all the companies around the world responding to the survey, finance executives are involved in strategic decision-making outside finance, and over three-quarters of respondents agree that the finance function’s influence and activity is growing. The change, which has been talked about for so many years, has definitely happened and is widely accepted as a mainstream responsibility of the finance team.

Leading CFOs today are influencing major business decisions. The majority report that they have final decision-making authority or a high degree of influence over activities such as changes in the business model, entering new markets, new business partnerships, and technology investments.

And, as you would expect, optimizing risk and compliance management and optimizing working capital are closely tied as the top business goals for CFOs around the world. But, perhaps unexpectedly, driving strategic growth initiatives comes in second. Finance has truly moved from being an historic advisor to being a real-time guide.

Collaboration and data management

However, it isn’t all clear sailing. It’s clear that there is a big gap between those CFOs who are excelling at guiding their companies’ future strategy and those that are lagging behind. And the areas where this is most noticeable are collaboration and data management.

While finance departments have high levels of collaboration with risk management, compliance, internal audit, and operations, their collaborations with sales, HR, supply chain, sales, design/R&D, manufacturing, and customer services are considerably lower. However, where collaboration is occurring, two-thirds or more of respondents say it is effective.

At the same time, nearly all respondents cite increasing amounts of data as adding more complexity to the finance function, which is more than the number who point to regulatory compliance or new skill requirements.

Interestingly, those who can address the complexity of data management seem to excel at breaking down the traditional barriers and collaborating with other functions in the company.

Technology is really the only way of overcoming the challenge of data complexity and turning it into an enabling strength. This is borne out in the survey, with more than a third mentioning outdated technology as their biggest obstacle to achieving their business goals, and another third blaming lack of skills. A quarter cited manual processes.

By contrast, nearly all respondents rated Big Data, real-time analytics, and predictive analytics as being important for the finance function’s successful performance in two years’ time. In addition, training and technology were the top two activities respondents see as promoting collaboration between the finance function and other business units. And more than half are intent on providing better business analytics.

Discover what it takes to be a leader

The final research will be available in the next few weeks. By registering below for your complimentary copy, you can discover what leading finance executives have done to separate themselves from the rest of the pack and how you can become one of them.

  • Learn why improving collaboration with other functions is a priority
  • Understand where CFOs see the most room for improvement and what actions leading CFOs take
  • Learn why tech woes frustrate finance as much as regulations and budgets
  • Find out why technology is enabling finance to have a more strategic focus
  • Discover why additional data is adding more complexity to finance

Register now to get your complimentary copy and become one of the first to read the results of the full Oxford Economics survey.

Please join me and my colleague Judy Cubiss at SAPPHIRE NOW on May 17 at 3 p.m., for an interactive session, Take the Right Steps to Create a High-Performing Finance Organization. 

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

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Neil Krefsky

About Neil Krefsky

Neil Krefsky is a Senior Director of Product Marketing at SAP Finance LoB Solutions. He is responsible for the development and execution of the product marketing strategy for SAP's solutions for the Finance Line of Business including: SAP S/4HANA Finance, Financial Planning and Analysis, Accounting and Financial Close, Treasury and Financial Risk Management, Collaborative Finance Operations, Enterprise Risk and Compliance.

The Future of Cybersecurity: Trust as Competitive Advantage

Justin Somaini and Dan Wellers

 

The cost of data breaches will reach US$2.1 trillion globally by 2019—nearly four times the cost in 2015.

Cyberattacks could cost up to $90 trillion in net global economic benefits by 2030 if cybersecurity doesn’t keep pace with growing threat levels.

Cyber insurance premiums could increase tenfold to $20 billion annually by 2025.

Cyberattacks are one of the top 10 global risks of highest concern for the next decade.


Companies are collaborating with a wider network of partners, embracing distributed systems, and meeting new demands for 24/7 operations.

But the bad guys are sharing intelligence, harnessing emerging technologies, and working round the clock as well—and companies are giving them plenty of weaknesses to exploit.

  • 33% of companies today are prepared to prevent a worst-case attack.
  • 25% treat cyber risk as a significant corporate risk.
  • 80% fail to assess their customers and suppliers for cyber risk.

The ROI of Zero Trust

Perimeter security will not be enough. As interconnectivity increases so will the adoption of zero-trust networks, which place controls around data assets and increases visibility into how they are used across the digital ecosystem.


A Layered Approach

Companies that embrace trust as a competitive advantage will build robust security on three core tenets:

  • Prevention: Evolving defensive strategies from security policies and educational approaches to access controls
  • Detection: Deploying effective systems for the timely detection and notification of intrusions
  • Reaction: Implementing incident response plans similar to those for other disaster recovery scenarios

They’ll build security into their digital ecosystems at three levels:

  1. Secure products. Security in all applications to protect data and transactions
  2. Secure operations. Hardened systems, patch management, security monitoring, end-to-end incident handling, and a comprehensive cloud-operations security framework
  3. Secure companies. A security-aware workforce, end-to-end physical security, and a thorough business continuity framework

Against Digital Armageddon

Experts warn that the worst-case scenario is a state of perpetual cybercrime and cyber warfare, vulnerable critical infrastructure, and trillions of dollars in losses. A collaborative approach will be critical to combatting this persistent global threat with implications not just for corporate and personal data but also strategy, supply chains, products, and physical operations.


Download the executive brief The Future of Cybersecurity: Trust as Competitive Advantage.


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How Digital Transformation Is Rewriting Business Models

Ginger Shimp

Everybody knows someone who has a stack of 3½-inch floppies in a desk drawer “just in case we may need them someday.” While that might be amusing, the truth is that relatively few people are confident that they’re making satisfactory progress on their digital journey. The boundaries between the digital and physical worlds continue to blur — with profound implications for the way we do business. Virtually every industry and every enterprise feels the effects of this ongoing digital transformation, whether from its own initiative or due to pressure from competitors.

What is digital transformation? It’s the wholesale reimagining and reinvention of how businesses operate, enabled by today’s advanced technology. Businesses have always changed with the times, but the confluence of technologies such as mobile, cloud, social, and Big Data analytics has accelerated the pace at which today’s businesses are evolving — and the degree to which they transform the way they innovate, operate, and serve customers.

The process of digital transformation began decades ago. Think back to how word processing fundamentally changed the way we write, or how email transformed the way we communicate. However, the scale of transformation currently underway is drastically more significant, with dramatically higher stakes. For some businesses, digital transformation is a disruptive force that leaves them playing catch-up. For others, it opens to door to unparalleled opportunities.

Upending traditional business models

To understand how the businesses that embrace digital transformation can ultimately benefit, it helps to look at the changes in business models currently in process.

Some of the more prominent examples include:

  • A focus on outcome-based models — Open the door to business value to customers as determined by the outcome or impact on the customer’s business.
  • Expansion into new industries and markets — Extend the business’ reach virtually anywhere — beyond strictly defined customer demographics, physical locations, and traditional market segments.
  • Pervasive digitization of products and services — Accelerate the way products and services are conceived, designed, and delivered with no barriers between customers and the businesses that serve them.
  • Ecosystem competition — Create a more compelling value proposition in new markets through connections with other companies to enhance the value available to the customer.
  • Access a shared economy — Realize more value from underutilized sources by extending access to other business entities and customers — with the ability to access the resources of others.
  • Realize value from digital platforms — Monetize the inherent, previously untapped value of customer relationships to improve customer experiences, collaborate more effectively with partners, and drive ongoing innovation in products and services,

In other words, the time-tested assumptions about how to identify customers, develop and market products and services, and manage organizations may no longer apply. Every aspect of business operations — from forecasting demand to sourcing materials to recruiting and training staff to balancing the books — is subject to this wave of reinvention.

The question is not if, but when

These new models aren’t predictions of what could happen. They’re already realities for innovative, fast-moving companies across the globe. In this environment, playing the role of late adopter can put a business at a serious disadvantage. Ready or not, digital transformation is coming — and it’s coming fast.

Is your company ready for this sea of change in business models? At SAP, we’ve helped thousands of organizations embrace digital transformation — and turn the threat of disruption into new opportunities for innovation and growth. We’d relish the opportunity to do the same for you. Our Digital Readiness Assessment can help you see where you are in the journey and map out the next steps you’ll need to take.

Up next I’ll discuss the impact of digital transformation on processes and work. Until then, you can read more on how digital transformation is impacting your industry.

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Ginger Shimp

About Ginger Shimp

With more than 20 years’ experience in marketing, Ginger Shimp has been with SAP since 2004. She has won numerous awards and honors at SAP, including being designated “Top Talent” for two consecutive years. Not only is she a Professional Certified Marketer with the American Marketing Association, but she's also earned her Connoisseur's Certificate in California Reds from the Chicago Wine School. She holds a bachelor's degree in journalism from the University of San Francisco, and an MBA in marketing and managerial economics from the Kellogg Graduate School of Management at Northwestern University. Personally, Ginger is the proud mother of a precocious son and happy wife of one of YouTube's 10 EDU Gurus, Ed Shimp.