It’s beginning to look a lot like fraud season

increasing potential for online fraud

It’s beginning to look a lot like fraud season

Though consumers are generally spending less, they are also purchasing more, albeit online. The sharp rise in online transaction volume brings along with it an increasing potential for online fraud. Are businesses prepared for the 2020 holiday season?   

COVID-19 has greatly accelerated the adoption of internet retail. E-commerce has become relevant to more people. The variety of items that can be procured has expanded as well as has the willingness to purchase just about anything, including daily necessities. 

With Black Friday and Cyber Monday around the corner and Christmas fast approaching, online retailers are bracing for impact. The higher volume of online shopping is widely expected to also see a corresponding rise in fraud cases. 

All across the pandemic-stricken European continent, shoppers are turning to the internet for their holiday shopping. A recent survey revealed that 69% of German consumers are only interested in shopping over the internet on Black Friday. 

Recently, the head of Europol’s European Cybercrime Centre (EC3) referred to the holidays as “peak season for cybercriminals and fraudsters.” Europol is warning consumers to be careful. But, are businesses doing their part?

The great acceleration

Research from McKinsey, conducted in April – May 2020 among more than 20,000 European consumers, shows that digital adoption in Europe rose to 95 percent (from 81 percent) as a result of the pandemic. Some analysts even refer to this accelerated digital migration as a five-year development condensed in a matter of months. 

A recent report released by the OECD further lends credence to the trend of increased e-commerce adoption. While e-commerce adoption has been accelerated by COVID-19, the scope of e-commerce has also expanded as a direct result of the pandemic. The realm of e-commerce now encompasses various new product categories as well as new consumer segments, such as the elderly. Furthermore, for many Europeans, e-commerce has become a means of procuring everyday necessities alongside the typical services and luxury goods.

Consumers are buying more online 

Insights gleaned from the European edition of PwC’s Global Consumer Insights Survey 2020 reveal that 40% of consumers in Europe have seen their household income decline as a direct consequence of the pandemic. The upshot is that 49% have cut back on shopping in stores and 38% are reducing their spending in the near future.   

This is particularly true for consumers in the United Kingdom (45%) and Spain (56%), but the trend is also evident across the continent as the research shows consumers in The Netherlands (30%), France (30%) and Germany (30%) also plan to keep a tighter grip on their purse strings.

Moreover, while European consumers have reduced the amount of visits to supermarkets, the share of online shopping in this vertical has actually increased by 10%. During the first wave of the pandemic, 28% of Europeans living in urban areas bought most of their groceries over the internet. Of the consumers who started buying their groceries online, a whopping 80% were planning to continue doing so. 

Overall, Europeans have stopped shopping for clothing, but are instead shopping for electronics and furniture.

Though overall spend might be lower this year in both Europe and the USA, the online share of spending is through the roof. Moreover, there is research that shows consumers, though cautious, are still willing to spend on a good deal. With Black Friday, Cyber Monday and the rest of the holiday season closing in fast, these peaks in volume are going to be a pain point for e-commerce businesses. 

With online spending comes online fraud

From phishing emails, click & collect fraud, automated bot attacks and account takeovers (ATO) to CNP fraud, the COVID-19 pandemic has emboldened fraudsters. Many consumers are either making online payments for the first time or doing so at a much higher frequency than before. From the fraudster’s point of view, it’s open season. 

Since every online transaction is an opportunity for fraudsters, the increase in online transactions means that there are more attempts being made to lie, cheat and steal. Unfortunately, many businesses still don’t have sufficient protections in place.

Businesses have also been experiencing a surge in chargebacks and disputes. These so called ‘friendly fraud’ incidents are on the rise for multiple reasons ranging from pandemic-related travel cancellations to customers not recognizing (or remembering) transactions they made. In some cases, customers might have simply changed their minds too late. This is often the case when customers subscribe to online services that start with ‘free trials’ before charging, but forget to cancel. 

The pandemic has wrought a period of voluminous false positives and false negatives. Whether positive or negative, the volatility itself is bad for all parties involved in a digital payment transaction. It cannot be stressed enough, that during a time of physical isolation, businesses with advanced digital platforms in place are at an advantage

How to protect your business

From missed revenue to disappointed customers and reputational damage. Fraud hurts businesses in more ways than one. By the end of 2020 we can also add non-compliance with European Union’s Strong Customer Authentication (SCA) requirements to that list. 

This holiday season, remember that protecting your business means protecting your customers as well as your bottom line. Though it might sound straightforward, it’s actually more akin to walking a tightrope. Why? That’s because the measures you take to prevent fraud, may also hurt your business in other ways. 

For example, if you’re fully up to date with European SCA regulations and have implemented 3DS2 in your payment flow, you should be aware that relying on 3DS2 for every single transaction is actually going to negatively impact the checkout process. 

Your goal is to facilitate transactions by removing any and all friction whenever possible, while at the same time, securing transactions with the highest level of security.

It is important to keep in mind that you only get one chance to offer a positive customer experience. Failure to offer a frictionless experience may result in unnecessary cart abandonment and lower conversion rates. 

A one-tool-fits-all approach – with for example, 3DS2 – might be the easy way out, but there are far better ways to prevent fraud. 


Did you know there are many cases in which SCA/3DS2 is exempted?
Read about it here: How to combat payment fraud without losing revenue 


If you’re looking to review, tighten up or implement payment security measures, consider choosing an experienced partner, trusted worldwide by industry leaders. 


At Mi-Pay, we’ve developed a complete secure payment solution as well as a standalone fraud API that eliminates chargebacks and offers a 100% guarantee to prove it. 

Interested? Let’s talk!


Chris Curd
Vice President of Sales

E: [email protected]
M: +44 7515083513