At Covery, we believe that fraud prevention is a crucial part of each business and must be efficient at each customer journey and sales funnel.
Unfortunately, the vast majority of companies learned this lesson in a rough time. In 2019 we were sure about fraud trends and technology amendments in 2020. By now, we see that COVID-19 brought drastic changes to all aspects of society and thwarted all expectations and predictions.
The pandemic impact on different industries is markedly different.
We came up with an idea to compare our 2019 forecasts for 2020 with the current trends and situation, especially within popular fraud types and fraud prevention methods. For this purpose, we analyzed our system industry reports with chargebacks, fraud alerts, and other data.
We do hope our insights will help to understand the process of change and its reasons in the most significant industries. Let’s start with the 2020 forecast we left in the MerchantFraudJournal 2020 Fraud Trends Report and finish with infographics with trends and insights.
As we thought it would be
We named technological trends of 2020, helping merchants deal with increasingly sophisticated fraud attacks: device fingerprinting technology, enhanced due diligence, age verification software.
We also mentioned that Machine Learning would gain more attention in 2020, as it supports other solutions in more precise decision-making.
We said that the future of PSD2 and SCA in 2020 fraud prevention is not yet known. The real outcome should appear in 2021 when all the integrations and updates inside businesses will come into effect. They will have full data and statistics to analyze the impact of PSD2 implementation and the behavior of their customers.
In 2019 we thought that people do not talk enough about the new age of FinTech and that 2020 will become a new era for internet bankings.
We also used the word automation that could become a buzzword in 2020.
As it turned out
Before 2019, during 2019, and in the pandemic time, we noticed a constant multiplication of devices used by customers of high- and low-risk industries, especially in eCommerce, that sees a huge growth today.
Device Fingerprinting continues to remain one of the best technologies that efficiently distinguish the right customers and fraudsters. The enhanced due diligence together with KYC, KYB, and AML can not just be left aside when most businesses strive to enter an online world.
AML and KYC are still necessary within the iGaming industry, attracting enormous attention today and staying with strict regulations.
Here we also must emphasize the relevance of automation.
More and more companies transfer their services to web platforms and develop their mobile apps to ensure instant solutions. Instant solutions require instant safety for both the company and the user. By “instant” we mean “automation”.
2020 step by step becomes a year of automation of all possible processes, especially inside payment platforms, especially the automation of Enhanced Due Diligence and AML procedures. Automation is not yet a buzzword, but it gains success.
Nevertheless, automation is a king because it saves your customer’s time, and your customer is the only one who rates you.
Payment Service Directive 2 came into effect in September 2019.
However, as we know, due to delays in the implementation, the European Banking Authority allowed for a time extension of the strong customer authentication (SCA) until 31 December 2020.
The implementation of PSD2 helps businesses across Europe to change their attitude toward fraud prevention. Then and now, we believe PSD2 is a massive opportunity for businesses to change fraud prevention perspectives, update services and platforms, and be more customer-oriented. As it was said, the real impact of PSD2 on fraud prevention will not be seen until the end of 2020. The outcome will appear in 2021.
2020 is the new age of FinTech. It is also a new era for other digital industries – eCommerce, iGaming, online dating. Two thousand twenty really and suddenly becomes a new era for internet bankings.
“We predict a great amount of new financial companies with no physical offices, with virtual cards and with features of classic B2C smartphone banking”. – how do you like it now?
Sadly, we could not predict that 2020 will become a year of significant challenges for healthcare systems throughout the globe.
What about trends and insights?
Starting from January 2020, we notice growth and decrease trends in traffic, event volumes, chargebacks, fraud alerts in different verticals.
Some industries have massive traffic breakdowns, while others have “the best times” with traffic, and, of course, the worst with fraud. To show each trend, we use the most illustrative periods.
E-Commerce & Online Services/Communities & iGaming
It was apparent that during the pandemic and quarantine, we will spot a substantial increase in digital purchases and subscriptions.
However, many B2C companies were not ready for the proportionally increasing amount of chargebacks, referral fraud, and bonus abuses.
“Since the beginning of the COVID‑19 crisis, Amazon has proactively stopped more than 6.5 million products with inaccurate claims, removed over 1 million offers for suspected price gouging, suspended more than 10,000 selling accounts for suspected price gouging and referred the most egregious offenders to federal and state law enforcement across the country. Amazon welcomes HSI’s partnership in holding counterfeiters and bad actors accountable, and we look forward to building on our long-standing relationship to protect customers and ensure a trusted shopping experience,” said Dharmesh Mehta, Amazon vice president, customer trust and partner support.
Travel & Ticketing & Booking & Events/Marketing
Travel restrictions and stay-at-home orders throughout the world caused a very sharp decrease in ticket purchases and all kinds of booking services related to the travel industry.
Lots of event agencies canceled or postponed concerts, conferences, and exhibitions.
According to United Nations World Tourism Organization, global international tourist arrivals could decline 20-30 % in 2020 as compared to 2019. It could proceed into a loss of US$300-450 billion (€270- 407 billion) in spending by international visitors (international tourism receipts). To compare, the SARS outbreak in 2003 led to a decline of just 0.4 %.
The International Air Transport Association (IATA) states that 4.5 million flights were canceled until 30 June.
According to Airports Council International, ACI EUROPE’s revised assessment of the impact of the COVID-19 pandemic is for a loss of more than 700 million passengers at Europe’s airports in 2020 – representing a decrease in passenger footfall of -28% compared to a business as usual scenario, and a €14 billion hit in lost revenues for Europe’s airport operators alone.
Although many things are happening online, the event volumes went down, but fraud rates somehow increased.
Fraud ratios have changed because the overall quantity of transactions has evolved, impacting the way of good and bad transactions perception.
Fraud became a more damaging thing.
The pandemic brought very new and unexpected changes to all existing industries. Businesses feel continuous tension because of traffic volatility and previously unseen amount of chargebacks and fraud types.
However, fraud prevention is not standing still, ready to accept all challenges anytime and effectively solving them. As we have already said: “The pandemic will end, fraud prevention – never!”