Retail Technology: SURVEY – Online fraud prevention pays


A 0.03% increase in online fraud prevention spend has delivered a dramatic 8% drop in credit card fraud, according to an industry survey

New research has shown that fraudulent use of stolen credit cards, the biggest area of online loss, has dropped since last year, as investment in online fraud prevention technology has slowly risen.

Results from the UK Retail Fraud Survey 2014 indicate that a very small (0.03%) increase in spending on online fraud technology has delivered a sharp decrease (8%) in credit card fraud.

The survey, published by Retail Knowledge and sponsored by Kount, is in its fourth year. The results are based on primary research carried out between January and March 2014 into the systems, processes and strategies used by the UK’s 100 leading retailers with annual sales totaling £137 billion.

Retail doubles down on shrink

Despite this decrease, many of the other areas of online loss have seen an increase in shrink since last year. Third party fraud payments showed increased shrinkage by 4% since last year, card testing has seen an increase of 3% and friendly fraud has seen no change since last year, remaining at 9%.

The biggest area of online loss remains from the fraudulent use of credit cards (43%), followed again by third party fraud payment (15%).

The results also indicate that the online channel is proving more difficult for employees to steal through. Internal fraud online is much lower than employee theft from stores, as physical access to products is limited to warehouse staff only.

Loss prevention operation silos

Other findings show that most retailers still treat store and online loss prevention separately. Typically the head of loss prevention focuses on stores and online shrinkage is managed separately. However, employees, customers and fraudsters do not make this distinction. 

Over half (51%) of the average loss prevention team works in stores and 49% in head office. Mass merchandisers have the highest store presence at 83% and small format speciality stores have the majority of their loss prevention team based at head office.

Retailers expect online sales to increase from 12% currently to 31% of total business over the next three years. As this happens, an adoption of an increasingly joined up philosophy to all loss prevention, store and online will be crucial, according to Retail Knowledge and Kount.

Originally published at Retail Technology.