The Real Cost of Online Fraud
The purpose of this research is to understand the current fraud landscape, barriers and challenges organizations face in mitigating the risk of online fraud and the resulting financial losses. The findings reveal that the number one challenge is the increasing sophistication of fraudsters followed by not having the right technologies to mitigate online financial fraud.
Sponsored by PayPal, Ponemon Institute surveyed 632 individuals who are familiar with their organizations’ efforts to prevent fraud and are involved in fraud investigation and mitigation and/or cybersecurity activities.
Sixty-one percent of respondents hold supervisory positions or higher in their organizations. Most of these respondents’ industry focus is eCommerce (27 percent), merchants (21 percent), retailers (16 percent) and travel (10 percent). A complete breakdown of industries represented in this research is presented in the Appendix of this report. Many of these respondents admit their organizations’ current tools or practices are not very effective in investigating online fraud and achieving compliance with IT security and privacy regulations.
Another key takeaway from this research is that COVID-19 is seriously affecting organizations’ ability to protect online financial transactions against fraud. Prior to COVID-19, 45 percent of respondents rated their effectiveness as high or very high. Today, only 34 percent of respondents rate their effectiveness as high or very high. Although digital transformation is important to organizations’ ability to support business goals, it challenges their ability to prevent online fraud incidents.
According to the research, organizations represented in this research are losing an average of $4.5 million per year due to online fraudulent transactions. As shown in Figure 1, despite these losses only slightly more than half (51 percent of respondents) say their organizations make it a priority to protect online financial transactions. Only 38 percent of respondents say the cost of protection outweighs the cost of dealing with losses.