Stripe’s Latest Report Details How Businesses Can Address the Rise of Online Retail Fraud

In the face of inflation, ending a war or unblocking supply chains, there is not much companies can do, but what they can do is optimize the way they manage their business.

So says a recent report by Stripe, which concludes that one of the biggest drags on growth is the fraud that occurs in e-commerce.

This report combines data from billions of transactions conducted on Stripe’s network between 2019 and 2021 with a survey of more than 2500 companies from 9 countries, which exposes global fraud patterns across markets and business models. It details the growing burden global businesses face from online commerce fraud, the difficult decisions they must make and the steps they can take to defend themselves and protect their profits. Key findings include:

• Nearly three-quarters of companies have redirected engineering resources, and more than half have curtailed expansion plans, due to fraud-related issues.
• Subscription companies are the biggest fraud fighters. 72% believe they will lose more money to fraud in 2022 than in 2021.
• The volume and sophistication of fraud varies dramatically between markets, requiring tools that adapt to local fraud patterns. France has almost twice the fraud rate of Germany, while Singapore registers half the rate of the Asia-Pacific region.
  “Fraud does not slow down when the economy does. It’s vital that companies maximize the value of every dollar by turning away as many fraudsters as possible without blocking good customers, and this report shows them how they can do that,” says Will Megson, product manager for Stripe Radar, Stripe’s leading fraud prevention product.

Of the companies surveyed, more than half indicated that fraud is a growing concern. The risk environment that now exists has had a particular impact on companies offering B2B SaaS products and B2C subscriptions.

According to the report, these companies are more susceptible to fraud because “they are most likely to be well-known brands, making it easier for fraudsters to resell stolen goods or services (such as buying a digital subscription with a stolen credit card, then selling it at a lower price).”

Business decision-makers are increasingly faced with more complex situations that they have to decide on. The report identifies the optimal sensitivity of a fraud model as a function of the company’s margins: the higher the margins, the less sensitive the model should be. Companies can also mitigate fraud risk through a thorough manual review of charges made, but this requires a great deal of effort at the human level, something companies often cannot afford.

Stripe has invested substantially in its fraud prevention tools to try to help companies maximize resources in the current economic downturn.

Stripe estimates that the improvements made in May block $40 million more fraud and recover an additional $70 million in revenue for users each year, on top of the billions of dollars Radar has already saved them.

“It’s still not well understood how much fraud hinders the growth of an online business. We have been subject to card hacking attacks for years, one of which was so significant that we were nearly kicked out of the card system, which would have ended our ability to run our business. Stripe offered us continuous protection that we could adjust against fraudsters, virtually eliminating fraud losses as we grew,” says Matthew Maier, CEO of Adblock.