What European Business Owners Need to Know About E-Commerce Fraud Retailers must find a balance between fraud losses, fraud prevention costs, and lost sales.

When it comes to protecting your small business from e-commerce fraud, there are two things you need to know: Fraud is real and can be costly, but protection can be costly, too.

Earlier this month, ResearchAndMarkets.com released its findings for the year, which showed that as online payment transactions increase, so do the forms of potential fraud that can occur. Overall, B2C e-commerce losses due to online payment fraud were expected to increase more than 10 percent around the world last year. Card fraud in online purchases makes up more than two-thirds of all the card fraud in the UK.

Between 2018 and 2023, losses from digital payment fraud are projected to more than double. This is leading consumers – particularly in Europe and the UK – to change their payment habits after the pandemic as they look for greater security.

Per the report, two out of every three e-commerce companies have noted a rise in fraudulent activities. In Switzerland, more than 85 percent of online retailers reported being victims of fraud.

This is not good news for businesses or customers, both of which are looking for secure ways to make transactions that won't result in lost money or product. It's no wonder businessowners are looking for ways to prevent fraud.

CMSPI, an independent global payments consultancy, reported that European merchants spent nearly €7 billion on fraud detection and prevention last year. That ended up being more than three times the value of what was lost to fraud in 2021. As a rep for CMSPI explained, "These practices are unsustainable for the continent's merchants, who are currently facing compound annual fraud growth of 1.5 percent. As retailers' margins are squeezed, fraud and its wider impacts are just another inflationary pressure that see merchants and good customers losing out."

"As the digital and brick-and-mortar store environments merge, merchants are facing a new fraud landscape with new sets of challenges," said Toby McFarlane, Head of Ecommerce for CMSPI. "Often merchants think they must choose one solution over another, but a targeted fraud strategy isn't an either/or situation. It is important for merchants to have a sophisticated understanding of their payments profile to address their major threats and balance risk."

Business owners must find a way to prevent fraud without turning away good customers with overly aggressive detection and prevention techniques. It is imperative that retailers find a balance between fraud losses, fraud prevention costs, and lost sales.

If you are looking to strike this balance and keep customers happy while curtailing fraud attempts, use data-driven insights that are specific to your company. Identify the threats to your payment profile and address those rather than hurriedly investing in every broad prevention service or implementing strict check-out policies that could deter otherwise honest customers.