19 April 2018
Nick Ogden


Nick Ogden - ClearBank

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A solution to online fraud is necessary

05 February 2010  |  2753 views  |  1

News out this week suggests that online spending is on the rise with Brits spending £38billion online last year and the expectation that this trend will only increase in 2010. However, with opportunity comes threat and it’s fair to say the security surrounding online payments is a major issue that can no longer be ignored for all concerned.

Recent findings from the Cybersource UK Online Fraud Report  says that UK merchants see online fraud as an increasing threat to their business, stating that they lost an average of 1.8% of online revenue to payment fraud in 2009. The report also revealed that many merchants are still manually checking for fraudulent payments, which with the incredible uptake of the internet for e-commerce, and the subsequent rise in online transactions, relying on manual checks is by no means sufficient.

In much the same vein, findings by Cambridge University researchers, Steven J. Murdoch and Ross Anderson has also found that the Verified by Visa and MasterCard SecureCode online card-security protocols are not as strong as once assumed, stating that the processes are vulnerable to phishing fraud and as such are actually less secure than other options. This is a growing concern as Card-not-present fraud soared 188% between 2003 and 2008 according to the authors, accounting for £328.4 million in losses to banks and merchants, which is more than half of all bankcard fraud.

With the research all pointing in the same direction it’s highly likely that merchants and consumers will start to demand better security measures in the imminent future, and why shouldn’t they? We are now in a world where we take for granted 24x7 access to the internet, and thanks to the mobile phone location is no longer an issue. With this in mind it’s now even more apparent that the payments security industry steps up to ensure that new payments technologies are supported by rigorous security mechanisms and are in line with technological innovation and changing consumer needs. Whatever the resolve, the key to success will be to create a secure environment where fraud prevention is no longer an annoying and time consuming obstacle but a simple and natural part of the transaction process and it is my belief that the simpler this is the better!



Comments: (1)

Paul Rattray
Paul Rattray - Private - Edinburgh | 10 February, 2010, 15:19

Motherhood and apple pie.

Of course we need better online security, but if you talk to old fashioned retailers, the ones with shops, they'll tell you how happy they'd be if only 1.8% of their stock walked out via a five finger discount.

Also, as you state, the 1.8% represents lost online revenue, not the merchants' true costs which will be less since we all like to make a healthy profit.

The merchant has to comply with the various initiatives such as 3D Secure or PCI DSS because they don't want liability for the losses. If merchants really needed to reduce these losses, there is a myriad of processes and procedures they could use to do so. The personal consumer doesn't mind since they don't usually have liability for the loss. 

So, if there is to be a change in the security and/or authentication model used to authorise transactions, it will be driven by the  banks and acquirers, and that drive will be dependent on their appetite for loss.


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I am passionate about business change and have been fortunate to have had some success with my various start up ventures. I am also fortunate to be a director of the UK Faster Payments Scheme.

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