The launch of EMV technology began last fall and is expected to diminish most card-present counterfeit fraud. However, experts anticipate in its place will be an increase in online fraud, with fraudsters now focusing their efforts on e-commerce. In fact, a survey conducted by Trustev discovered that online fraud within the U.S. is likely to rise 106% within the first three years after the Fall 2015 liability shift. Many other countries have already migrated to EMV transactions, and previous reports have shown that merchants abroad also experienced a large spike in e-commerce fraud post-shift. 


It is important to note the different types of fraud that are most common with businesses, as this will create awareness on how to mitigate fraud from all different angles. So what does this mean for online fraud for 2016? Let’s take a further look at what types of fraud are expected to appear within an online e-commerce environment and steps business can implement to prevent them: 


1. Identity Theft
Perhaps the most prominent form of fraud is identity theft, which can be easily done online. This kind of fraud happens when a fraudster steals a cardholder’s personal card information and uses it for illegal purchases. When this happens, a consumer will typically contact the business where the fraudulent purchases were made as well as their bank and initiate a chargeback. The bad news is that the business does not get paid for the illegally purchased item. 


One way to prevent identity theft from possibly happening is by authenticating the billing address and CVV code on a credit card. This helps confirm that the cardholder is the true identity of the person authorizing the purchase. Using an address verification system (AVS) can additionally verify if the provided address matches the on file billing address with the issuing bank. 


2. Jeopardized Data
This type of fraud happens when a website, point of sale system, or other platform that keeps private credit card information is illegally hacked. When this happens, a business could be held responsible for high fines on top of negative publicity for the data breach. 


Both Target and Home Depot are two large corporations that experienced a compromise with their data systems in the past few years. Over 40 million Target customers had their confidential credit card information jeopardized, causing Target to pay $252 million in damages to control the breach. 


Tokenization and end-to-end encryption are two solutions that can help combat a compromised system. Tokenization substitutes card information with a randomized set of characters, known as a token. Encryption transforms data using an algorithm, making it illegible to comprehend by hackers. Deploying both technologies will ensure a safer and more secure system, making it very difficult for fraud to occur. 


3. International Fraud
This form of fraud is committed all around the world by international fraudsters who use the payment system to their benefit. Their goal is to extract money or products from other businesses via scams. International sales are highly risky and there is hardly any protection against fraud. 


As a result, it is vital that businesses be extremely careful with international sales. Most other countries do not utilize address verification for security measures, making international sales an easy target for fraud. Because of this, it is encouraged that businesses only do business with recognized international customers. Any new customer should be examined by their personal information and the sale details. 


Identify theft, jeopardized data, and international fraud are three types of online fraud that will be present in 2016. However, recognizing the different types of fraud will allow businesses to implement security procedures to help ward off potential threats from ever happening. The sooner merchants incorporate fraud management solutions for their online business, the quicker they can avoid losses.