Merchants in the United States, particularly those handling international transactions, are grappling with increasing cybersecurity challenges.
With 82% of large merchants reporting data and cyber breaches over the past year, the financial impact is considerable, affecting revenue and customer trust, according to the PYMNTS Intelligence report “Fraud Management in Online Transactions.”
The report explored the challenges and strategies in online fraud management. The analysis addressed how merchants are navigating the rising frequency of data breaches and fraudulent activities, especially within international eCommerce. It also examined various anti-fraud measures, evaluating their effectiveness and the implications for business operations.
The report found that there is a need for stronger anti-fraud strategies and enhanced cybersecurity measures to safeguard cross-border transactions.
Outsourcing fraud prevention to specialized providers has proven effective, achieving a 32% reduction in failed payment rates compared to in-house efforts. Although only 53% of merchants implement two-factor authentication at the transaction level, its use is crucial for minimizing payment failures. These findings underscore the benefits of using external expertise and adopting advanced security protocols to bolster fraud management and protect financial transactions.
The report found that cybersecurity challenges are pervasive and have had substantial financial repercussions, with nearly half of eCommerce businesses reporting losses in revenue and customer churn as a direct consequence of such security incidents. The effects undermine the execution of cross-border payments.
Cyber breaches are increasingly exposing vulnerabilities in eCommerce transactions, and 47% of merchants experienced both customer loss and revenue decline due to fraud.
Among various anti-fraud strategies, outsourcing fraud prevention to specialized third-party providers has demonstrated success. Merchants who have partnered with these providers reported a lower average failed payment rate of 8.5%, compared to 13% among those managing anti-fraud processes in-house.
This 32% reduction highlights the advantages of using external expertise and advanced technology that may not be readily available or affordable for all businesses. Outsourcing allows merchants to benefit from sophisticated tools and expertise, effectively reducing operational burdens while enhancing fraud detection and prevention.
As a result, merchants achieve better operational efficiency and increased customer satisfaction.
Two-factor authentication is identified as an effective measure for combating fraud and reducing failed payments. The study revealed that merchants employing per-transaction 2FA — where customers must authenticate each transaction — reported the lowest failed payment rates at 10.3%.
This method outperforms other security measures, such as 2FA at login or transaction confirmation notifications. Implementing or enhancing 2FA systems can substantially lower fraud rates and improve overall transaction security, benefiting merchants and their customers.
Consider that 95% of merchants want to implement anti-fraud solutions within the next 12 months.
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