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Mobile and social media commerce to inflate online fraud losses

Mobile and social media commerce to inflate online fraud losses

• After two years of steady decline, online fraud will rebound and grow 18% (£30 million) to £195.3 million by 2015, driven by mobile and social media shopping

• However, this growth will drive the total value of internet retail sales to £33.7 billion by 2015 (an annual increase of 4.5%)

• Fraud risks are higher as users need to provide less information to make a purchase, according to 30th June 2011, London:

The cost to the UK economy of e-commerce fraud is expected to grow by £30 million by 2015 as mobile phones and social networking sites create new opportunities for criminals, claims today.

According to a report conducted by the Centre for Economic and Business Research (Cebr), on behalf of, the impact of e-commerce fraud on the UK economy is likely to rise by 18%, from £165.2 million in 2011 to £195.3 million in 2015.

“The rise of new e-commerce channels: Shoppers Delight or Gangsters Paradise?” report states that this is largely due to new payment channels being more vulnerable to fraudulent activity during the years of early adoption, as it takes time to discover and resolve underlying security issues.

According to the report, the growth of mobile and social media shopping is expected to drive total online sales to £33.7 billion by 2015, an annual growth of 4.5%. The report also forecasts that the number of internet users purchasing products via their mobile phones will rise by five million, to 10.5 million, by 2015, while social media is also expected to be a significant growth area, with an additional 2.9 million users making shopping purchases through these channels by 2015.

However, this boost to the e-commerce market has a downside, bringing with it a far greater fraud risk. Since its peak in 2008, the economic impact of e-commerce fraud has declined, falling by 16% in 2009 and a further 4% in 2010 as businesses adopted more secure payment mechanisms and fraud screening detection tools, such as Verified by Visa and Mastercard SecureCode.

However, the introduction of new online shopping channels will reverse this trend, according to’s report, and shopping through social media sites, mobile browsers and apps is expected to be the biggest contributor to the losses, costing £24 million by 2015.

Jo Shaul, Customer Relations Manager at Blacks Leisure Group, comments: “We’ve been so encouraged by the success of our transactional website that we’re now reviewing further expansion of our offering with the possible introduction of mobile and social media payment channels. It’s important we offer our customers the most convenient way to make a purchase, whether that’s in our physical stores, at their desk or on the move. It is our view that these channels present a strong growth opportunity. We want to be ahead of the curve and be ready with a fully functioning, secure offering as the market matures over the next few years.”

Tamara Heber-Percy, Founder and CTO, Mr & Mrs Smith comments: “As consumers increasingly want access to everything through their mobiles, we’ve developed our mobile offering to meet the demand. Our mobile site will go live shortly and will soon be followed by an iPhone app. We were careful to wait until the time was right and we had a strong idea to support the app, so we weren’t just developing this channel for the sake of it. However, we’re excited about this new payment avenue and are confident our customers will enjoy an efficient and secure mobile offering.”

Michael Norton, Managing Director of, comments: “Shopping on a mobile phone or favourite social media site is the next big thing in e-commerce, but criminals are likely to capitalise on poor awareness of the risks by consumers and retailers alike. This study shows these new ways of shopping could be victims of their own successes for all the wrong reasons. The next few years will be a period of trial and error as mobile and social media commerce evolves in the UK.

“These large increases in fraud could have a big impact on retailers, as they find themselves having to watch for (and subsequently account for) new kinds of fraud they haven’t seen before. It will be more important than ever for online retailers to have a robust, traditional e-commerce fraud prevention system in place so that best practice strategies can be rolled out to the new shopping platforms.”

These channels are relatively new, which means that there is less history available to monitor the potential fraud risk associated with a transaction. In addition, consumers using them provide less personal data than through traditional e-commerce sites, so the retailer has fewer criteria to check against.

This means that each transaction has a smaller footprint and e-retailers will need to be more vigilant of the customer information they have access to. Monitoring fraud in real-time, against a detailed set of criteria using as many tools as possible, will help to identify a dubious payment.

To help retailers offer all consumers the safest online shopping experience,’s FraudGuard fraud management platform reduces online fraud by up to 70%. It checks each transaction against 35 fraud criteria in real-time, allowing online retailers to fine-tune fraud policies and protect their customers against fraudulent activity, such as ID theft and payment card fraud.

For social media training, contact the experts at The Knowledge Engineers who can help you to achieve social media success. 



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