Online payments get easier, but so does fraud

After-purchase payment options are gaining enormous popularity among some e-commerce operators, yet the risk of fraud for online transactions is greatly underestimated by many online retailers.

After-purchase payment options are gaining enormous popularity among some e-commerce operators, yet the risk of fraud for online transactions is greatly underestimated by many online retailers.

Ryan Murtagh, co-founder of payment solutions provider Neto – which was acquired by Telstra last year – told My Business that despite being a relatively new option for online shoppers, the volume of trades being made using this method is “incredible”.

“Traditionally, online stores would be offering PayPal and credit card and maybe direct deposit and BPAY as payment options. In the last 12 months, we've seen a really rapid uptake in the use of after-purchase payment solutions,” Mr Murtagh said.

“These are solutions whereby a customer can purchase from a merchant's website online and then pay for the purchase later, much like you can in a traditional offline retail store [such as] purchasing some furniture offline and pay for it later on interest-free terms."

He added: “We've actually noticed that on some of our retailer's sites, up to 20 per cent of the purchases being made on those sites are using these after-purchase payment solutions, so I think that's pretty incredible considering they have only been around for 12-plus months.”

However, according to Mr Murtagh, the risk of fraud is being severely underestimated by many online retailers, and the prevalence of fraud is likely much greater than anyone realises.

“I think a lot of start-up online businesses don't account for fraud, like a traditional retailer would account for someone shoplifting from their premises."

He said: "I think that's a big mistake that a lot of retailers make – online retailers need to understand that fraud is part of doing business online."

Mr Murtagh continued: “There are just lots of little bits of fraud going on, which adds up to a big number at the end of the day, but nothing that's probably newsworthy. The fact that we haven't had any merchant experience fraud to the level that it's been devastating to their business is probably a testament to that.”

Mr Murtagh said a common example of fraud being experienced by retailers is the interception of deliveries by false recipients who steal the goods – commonly electronic equipment that is easy to resell. This, he explained, in many instances is an unnecessary cost for businesses to take on.

“Merchants are just not aware that online fraud happens, and so they don't have the right checklists in place, [or] a simple checklist that their staff can go through when processing a transaction – like checking whether the transaction is coming from overseas; whether the email address on the transaction is coming from a free account like a Hotmail account. Those can drastically reduce fraud, and they are simple steps, but they make a big difference,” he said.

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