2023 Fraud TrendsExamining 10 of the Most Risk-Prone eCommerce Trends That Might Threaten Your Business in 2023

January 12, 2023 | 14 min read

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2023 Fraud Trends

In a Nutshell

Every retailer and financial institution wants to remain relevant and up-to-date with emerging tech and platforms. However, each "new" thing also comes with its fair share of risk. In this article, we’ll take a close look at the latest trends in eCommerce to reveal which innovations are right for your business… and which are the riskiest.

Relevance is absolutely critical for eCommerce retailers. Missing out on shopping trends and emerging technologies can hamstring your online business fairly quickly.

Trends in technology, preferences, and customer behaviors change quickly in the digital marketplace. Keeping up with new developments is crucial to maximizing profits… and also to protecting revenue against fraud and chargebacks.

That’s why we compiled a list of the top fraud trends of 2023 to help you determine the best investments for your business over the coming year.

The State of eCommerce: 2023

According to Insider Intelligence, only 17.8% of retail sales were made online in 2019. However, that figure is expected to climb to 20.8% in 2023.

This could be partially attributed to lingering pandemic-related issues, and the slow reopening of physical stores. However, it’s really just a blip in a long-term trend that was underway years before covid.

The global eCommerce market will top $8 trillion by 2026. As we see below, the digital space is where the bulk of foreseeable growth is going to emerge:

Source: Statista

Of course, whatever is popular with the public is bound to attract the interest of fraudsters. As we become more reliant on digitally sourced content, products, and services, we open ourselves up to increased risk. 

Statista estimates that eCommerce losses to online payment fraud were estimated at $41 billion globally in 2022. The figure is expected to reach $48 billion in 2023.

Source: Juniper Research

Merchants must work to meet this challenge. It calls for building fraud prevention platforms that rely on AI‑powered, risk-based scoring to best suit changing market conditions. Before they can accomplish this, however, it’s important to get a sense of the landscape.

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While it’s extremely important to pay attention to emerging trends in retail, it’s equally critical to understand the pros and cons associated with them, too.

This list is intended to contrast the promise with the realities of modern retail and help you make the smartest decisions for your business for 2023 and beyond.

#1 | Artificial Intelligence

AI presents a lot of benefits. Machine learning technology helps cut through a lot of sticky red tape and can drastically reduce costs, including manpower, overhead, and services. 66% of businesses have piloted process automation in one or more business functions. 

What this means is that commerce has reached a stage in which businesses are primed for AI expansion. But are we really ready? And is the tradeoff worth it?

Generally speaking, AI-driven automation still requires human oversight to manage tasks effectively and will continue to require this for the foreseeable future. This is because overreliance on AI for fraud detection can lead to issues including false positives and missed red flags. The program will often flag legitimate customers without cause while sometimes letting fraudulent transactions slip right by. 

Without consistent manual review, machine learning platforms simply don’t work. While the platforms are self-learning, you will still be required to pay someone to review those transactions and queries that the computer doesn’t understand. Also, keep in mind that post-transaction threats like friendly fraud are going to sail right through undeterred. 

#2 | Augmented Reality

Augmented reality programs give customers the ability to see items in the context of their own homes — on their walls, on their counters, etc. It accomplishes this in a way that a simple picture could never hope to do. Once the item has been selected according to size, color, pattern, or design, the customer can choose how they’d like to pay and receive the item.

AR can facilitate an interactive marketplace experience. It gives you the ability to showcase products in a dynamic, interactive way.

2023 Fraud Trends

Source: US Chamber of Commerce

Although augmented reality is an extremely sophisticated tool, it does present several fraud risks of which you should be aware. Firstly, AR is capable of exposing incredible amounts of user data that can be leveraged against businesses and consumers alike. For instance, social media apps like TikTok and Snapchat record and utilize biometric data through various popular filters.

In the wrong hands, this data could be used to crack biometric verification safeguards for banking and cloud applications. Through this technology, fraudsters could gain access to a business’s CRM software, banking apps, and any number of personal data streams. Remember, AR-enabled applications can record facial expressions, speech and voice recognition. Even retinal patterns that can identify users and customers may be hackable.

#3 | BOPUS

The “buy online, pick up in-store” option, or “BOPUS,” is a reasonably straightforward concept. The platform allows users to shop for items they like online and then tap a few buttons on their smartphone or another device to order and arrange pickup. 

BOPUS is so simple, in fact, that in-store pickup options are rapidly outpacing other shopping methods. According to Business Insider, nearly 70% of US consumers prefer BOPUS options to make purchases. 50% go as far as to choose one retailer over another based on BOPUS availability. 

BOPUS can be a great source of revenue. That said,  protecting your business from fraud and chargebacks should be a very high priority. Introducing card-not-present payments into the brick-and-mortar space involves a lot of risk. You can’t see the buyer’s payment card at the time of purchase, which can make it difficult to verify the buyer.

Fraudsters can take advantage of this. For instance, a bad actor may use stolen cardholder information to complete an online transaction, then appear in-store to pick up the goods. By the time the fraud is discovered, the perpetrator is long gone.

#4 | Chatbots

A form of AI-driven customer service automation is increasingly popular with merchants across every vertical. Contemporary customers expect round-the-clock support, and if your business can’t meet this demand, you could be setting yourself up for failure later on. 

Chatbots can be pre-programmed to answer queries within a limited framework, take generalized contact and complaint information, or lead customers to the correct person in a given department. And, aside from making the merchant or business available at all times, chatbots have a pretty diverse range of uses, which provides value. However, there are kinks in the chain here, too.

Chatbots can be a great way to streamline customer service. If deployed ineffectively, though, they can frustrate customers and push them to skip to a chargeback. Many customers will be annoyed if redirected to a machine or answering service to file complaints or resolve issues. 

To combat this, you will need to balance your customer service needs with the realities of staffing and overhead. That’s easier said than done.

#5 | Card-Not-Present Sales

Online shopping is an $8.1 trillion market that represents around 24% of global commerce. The popularity of online shopping isn’t surprising; after all, it doesn’t get much easier than opening a site or app on your smartphone, scrolling through options, and making purchases with a single tap. 

Retailers across the globe are well-aware that eCommerce is a hot market. It’s at the point now that online portals are generally considered a vital component of any business. However, there's a very important caveat here. Namely, eCommerce makes you much more susceptible to card-not-present fraud, which now accounts for up to 80% of all acts of fraud worldwide

Card-not-present fraud is a tangible side-effect of the online sales boom. In the CNP environment, you lack the ability to visibly verify and physically authenticate customers. This naturally makes you more susceptible to fraud and chargebacks.

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Without access to a physical card, it’s not easy to know whether you’re dealing with the cardholder or an imposter. Cybercriminals obviously see this as a weak link in the transaction process, and are happy to take advantage. 

Beyond this, CNP transactions also make it more difficult to separate third-party fraud from first-party fraud. A customer who is dissatisfied with an online purchase doesn’t actually need to come into a store to return an item. Because of outdated chargeback rules laid down by credit card networks and banks, customers who shop online may feel empowered to skip the return process altogether. Instead, they call their bank directly and request a forced refund. 

#6 | Data Protection

Protecting user and customer data has become more important than ever. It’s no longer enough to verify users via a password. Now, businesses must find increasingly complex ways to verify dynamic data; anything from biometric data to tokenized payment information could be on the table. 

Transaction-level fraud prevention tools do nothing to stop data breaches, though. And, with all the customer data now being stored in your systems, a slight error could expose thousands of your customers at once. Fraudsters are extremely adept at using spoofed or stolen credentials to gain access to merchant systems and stored customer data.

53 million individuals were impacted by a data breach in the US in just the first half of 2022. The problem will only get worse; consider that AR applications can potentially capture all of the information we see and hear through our devices. The opportunities for fraud and data breaches are a major concern.

Customers are less forgiving than ever about data breaches. They hold grudges against entities who expose their data. That's why you need to ensure you're investing in the right tools, revising and updating security practices, and maintaining compliance. This is not an inexpensive process, and there is no “one-size-fits-all” cybersecurity solution to fit all businesses. 

#7 | Mobile Shopping

Mobile commerce now represents $431 billion in sales in the US annually, with Walmart and Amazon accounting for the most uses via Android and IOS. In 2023, mobile shopping traffic is now dead-even with desktop shopping online, with 79% of the public having made an online purchase in the last 6 months. 

These stats certainly imply that eCommerce is morphing into a “mobile-first” venture, wherein merchants need to optimize — and create content — for mainly mobile users. Chief concerns in this area are appearance, functionality, and of course, fraud prevention. 

Mobile shopping is unique among CNP commerce avenues in that it can also be used to make in-person purchases if mobile wallet software like Apple Pay or Google Pay is enabled. However, the vast majority of mobile purchases are made via applications or directly through a browser. While those applications may have some customer verification systems built into their platforms, none are immune to fraud. 

You must be ultra-vigilant about your mobile practices. You have to consider each end of the spectrum, from cart abandonment and conversion to fraud prevention. This is a delicate dance without clear instructions.

#8 | Subscriptions

Subscription services are an excellent way to break up larger loyalty dues and membership payments into smaller, more manageable increments. They can significantly improve your reach, increase monthly revenue, and allow customers to try services before agreeing to larger payments. 

All that said, many subscription-based services are also notorious for practices that customers don’t love. Specifically for sketchy service and hidden fees.

One of the biggest drawbacks for customers lies in the public’s natural aversion to contracts. Another is that they often subscribe to things and forget about them until their statement arrives to remind them of the arrangement. 

Ultimately, subscription models can be very lucrative when managed effectively. But, they are also highly susceptible to recurring billing chargebacks. It really doesn’t matter how simple your terms are, how visible they are, or how excellent your customer service is. If you provide subscription services, you will be on the receiving end of your fair share of chargebacks. 

#9 | User-Generated Content

Promoting or sponsoring user-generated content, or UGC is attractive to merchants because it is affordable, personable, and popular with the public. Think about sponsored content on YouTube; given that billions of people visit these platforms every day, there is a huge market there just waiting to be guided to your site. 

That said, bad recommendations can lead to problems. Buyer’s remorse, misunderstood terms and services, or misapplied promotions can take the wind out of your marketing efforts. Even worse, affiliate fraudsters might deliberately target you in this way.

When you elect to promote your products and services through social media, it’s important to vet your affiliates very carefully. You must make sure that the influencer has the necessary reach to promote your products to the right audience and that they have the requisite expertise to speak about your products with authority. 

Let’s face it: affiliate marketing scams are a big deal in today’s market. Failure to vet content providers in advance can lead to spikes in fraud and chargebacks. 

Consumers have seemingly unlimited options for spending money nowadays. They can make purchases in-store, online via desktop, or through any mobile device. Now, via an emerging shopping technology, customers could start shopping through voice search

Voice-enabled technology would allow customers to shop wherever it’s enabled. They can shop in their homes with devices like Amazon Alexa and, soon, through automobile listening services like Google Voice or Sirius XM. By hitting a button and speaking their order aloud, customers will be able to order products and services, pay for parking and gas, and even order a cup of coffee without ever getting out of their vehicles. 

Voice-search uses tokenized payments, providing transactions the same protections as EMV chip cards without manual implementation. Also, voice-enabled technology is comparatively safe– backed by Visa, to ensure each transaction is complete and secure. Having said that, the system does propose a few flaws for merchants.

Voice-enabled commerce isn’t exactly “out” yet, for one thing. Although it’s soon to become a reality, the future remains uncertain. Since voice technologies are reliant on devices that essentially amount to “willing spyware,” these devices can record a lot of extremely sensitive information that could pose a tremendous security risk if compromised. Of course, the fraud concerns are limitless. 

Deep fake technologies that are used to imitate celebrities and political figures can also be used to impersonate consumers’ voices. The technology could be revolutionary, but both consumers and merchants should proceed with caution.

Protect Yourself. Innovate With Intention.

Frankly, all of these emerging trends and technologies are happening whether you’re ready for them or not. If the goal is to future-proof your business, you can’t afford to ignore any of them for very long. What will work with your business model and existing systems are entirely up to you to experiment with, and prioritize. 

Although, in order to do so safely, you must first take a long hard look at your fraud detection and prevention methods to determine what will work best for you and your customers. But fraud prevention won’t be enough. You need to have a solid chargeback management strategy in place as well, and sooner than you might think. 

The existing chargeback system is complex, confusing, and difficult to manage. The process is simply not well-suited to the digital market, and each card network has its own rules and regulations governing chargeback procedures and the conditions under which they can be challenged.

To get the most out of every one of the newest trends in eCommerce, a multi-tiered approach to fraud and chargebacks is absolutely essential… now more than ever before. 

Thankfully, you don’t have to innovate alone. With over a decade as an industry leader, Chargebacks911 is uniquely placed to help merchants navigate their fraud and chargebacks prevention strategies wisely and effectively. 

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