New study reveals UK consumer concerns over ID and payment fraud online

Over 2,000 people participated in the Consumer Insights Study: Fraud and Identity released today by Jumio, Inc. and conducted online by Harris Interactive. The findings give an interesting insight into the UK’s attitude towards age restriction laws and ID verification, making it clear that there is still discontent over ID and payment security.

The results of the study revealed that:

  • 79% of Brits are concerned about online ID theft and think more could be done to protect them
  • 1in 6 Brits think it is OK to use fake ID to purchase alcohol
  • 4% of Brits confessed to using fake ID to obtain a credit card
  • 23% of Brits owned up to having used a friend or family’s credit card for online shopping (with or without their permission)
  • Females are a third more likely to report fraudulent activity on their credit card then men

With Britain leading the way in ecommerce in Europe with a turnover of 96 million Euros in 2012 (Germany a distant 2nd with 50 million Euros) it is frustrating that the industry still faces serious issues of payment and identity fraud.

It is testament to the British people that so many of them are aware of online security pitfalls – but what is worrying is the lack of infrastructure to tackle ID fraud in the UK.

While most merchants realise that fraud is a major problem, they need to look at their role in prevention, including taking the necessary steps to confirm that a person conducting a transaction is actually who they say they are.

All it took was a little bit of high level team work

Speaking to Finextra Davide Steffanini, general manager at Visa Europe outlines how Italy is leading the way in providing a country wide infrastructure to migrate to mobile payments at a faster rate than other countries in the world.

According to Steffanini, Italy has been making a concerted ever over the past 3 years to iron out the problems faced by all parts of the mCommerce chain including operators, merchants, banks and of course the consumers.

What is key to Italy’s ability to move forward now is that the Operators, Merchants and Banks are working together to make sure mobile payments are well governed. Equally as important is the reliability and robustness of the mobile networks, so that the infrastructure can be used on a much wider scale than is seen in most other countries in the world.

It is well documented that mobile is the future of payments but it will be interesting to see what problems (if any) the Italians face by using mobile payments on a larger scale.

Will EMV push fraudsters to target online payments in the US?

According to the latest figures from FICO Card Not Present (CNP) fraud was nearly double that of counterfeit fraud in the US over the past 20 months.

The cry is that CNP fraud is especially difficult to combat and with the introduction of EMV set to make card present transactions more secure, fraudsters will shift online to strike the path of least resistance.

There is some historical truth in the CNP environment being hit harder by fraudsters when other payment areas are made more secure, as the Javelin group points out, but since the US has taken longer to adopt EMV it actually may have an advantage.

EMV / Chip and PIN has been in widespread use for nearly a decade in most countries worldwide (2005 in the UK and significantly earlier than this in France), so for the US this means many of the online security challenges surrounding it have already been dealt with.

The technology available today is significantly more advanced than it was even 5 years ago, and the US is in the best position to benefit from this and the experience of the over 100 countries worldwide that have already migrated to EMV.

With these online anti-fraud tools in place, it is likely that the US will witness a much smoother transition onto EMV than many have already faced. That’s not to say online fraud levels will drop, we’re still in global combat, but in comparison to other global forces, the introduction of EMV will probably have very little impact on online fraud.

Fraud Across the World

It’s no surprise that US issued cards are high fraud risk for EU merchants but who would have thought the French would be so hot on their heels?

It has been well documented that hackers and criminal gangs regularly seek out new ways to exploit the vulnerabilities of the online and card-not-present environment to perpetuate fraud and identity theft.

That said the fraud levels vary across the globe and online merchants should be one step ahead in understanding the threat. Statistics published by the IMRG this week revealed some interesting insight into which countries were responsible for issuing the cards that were posing European e-Commerce merchants with the biggest headache.

Whilst many of the findings were easily predictable, such as US-issued cards remaining the biggest risk for European e-merchants (mostly like due to the lack of EMV), there were some surprises, in particular France narrowly coming in at second place. There were also large increases in fraud attempts coming from cards issued in Spain and Norway in 2012.

Looking further afield the results showed that there were 20 countries which together accumulated 5% of the total fraud seen by the sample’s merchant base. With African nations dominating the top 5 (Zambia leading the way) other countries included in the list were Lithuania, Mauritius and Papua New Guinea.

Fraud rates do not only vary by country but also by products too.

Online retailers should also be vigilant if selling specific product lines. Last Christmas the products most targeted by fraudsters included iPads, Nikon cameras, Ralph Lauren polo shirts and Calvin Klein boxer shorts.

With the risk of falling foul of fraudsters being one of the biggest turn-offs for potential customers it is critical that e-Commerce merchants are seen to be tackling this issue.

If e-Commerce retailers want to avoid the risk of falling victim to malicious cyber criminals they should be working overtime to make the CNP environment as secure, and trusted, as the card-present one.

About Jumio Corp

Jumio delivers the next-generation in identity verification, enabling businesses to reduce fraud and increase revenue while providing a fast, seamless customer experience.