With increased digitalisation in emerging markets around the world, merchants have started to offer alternative payment methods in the hope that they will grow their market share and appeal to the changing preferences of their customers. This includes delayed payments such as Buy Now, Pay Later (BNPL) and account-to-account payments. However, with the increasing adoption of new payment methods, there is a growing threat to the payments industry in the form of cyber-attacks.

A report released from Accenture earlier this year found that the top three sectors facing cyberthreats were financial services, manufacturing, and technology – experiencing an increase of 45% in ransomware attacks. Digital solutions are dominating our daily lives, from the way we eat, live, work and even consume entertainment. Hence it becomes increasingly important that merchants optimise their risk operations to best protect themselves and their consumers from cyberattacks.

The continued growth of ecommerce

Over the last few years, geopolitical developments including the COVID-19 pandemic, influenced how we use innovative technology, with the internet offering some semblance of normality during a period of great uncertainty. For example, with a growing number of merchants moving online to meet demand from their customers, shopping habits amongst consumers around the world changed, and ecommerce saw a global boom. Online transactions peaked last year when $5.2 trillion in sales were generated via ecommerce channels.

While there has been discussion that brick-and-mortar stores are growing in popularity post-pandemic, as shoppers missed the in-store experience, our research suggests that the convenience and availability of international products online is something that shoppers continue to value. According to our cross-border ecommerce report, over half (53%) of American shoppers reported that they had purchased products from international online retailers in the past year. What this PayU report tells us is that demand for online ecommerce isn’t slowing down, and for international merchants, this presents a strong opportunity for them to tap into the US market. However, with the surge in popularity of ecommerce platforms, it must be noted that this has also resulted in a significant increase in cybercrime and payment fraud.

Increase in cyberattacks

Inevitably, with technological innovation has come new methods that cyber-actors are using to obtain data, target merchants and commit fraud. The risk of falling victim to fraud has increased in parity with more merchants moving online and the value and volume of sales processed via ecommerce platforms increasing. Statista research highlights that cybercrime was the leading type of crime that half of all large businesses and over a third of SMEs surveyed fell victim to during the past year.

Further, with the number of transactions processed online increasing, businesses have also become more advanced in the payment options that they have offered to customers such as Buy Now, Pay Later and e-wallets. The popularity of these new payment methods should not be shunned as research found that last year BNPL payments reached a global sales value of  $120 billion. -- This figure is only set to grow to $576 billion by 2026. What this has meant however, is that as things have become more digital, there are additional vulnerabilities that can be exploited by criminals, giving them more opportunity to target merchants and their customers.

With Buy Now, Pay Later payment methods for example, credit fraud continues to affect merchants and shoppers. Research found that credit fraud is continuing to increase year-on-year, with BNPL fraud increasing by 66% between 2020 and 2021. This is largely due to credentials being stolen, and often left unnoticed until payments go through at a later stage, but other examples include new account abuse and synthetic identity fraud too. With cyberattacks and payment fraud increasing, it is important that merchant's partner with a Payment Service Provider (PSP) that prioritises online security and takes advantage of innovative technology to clamp down on illicit activities. At PayU for example we are continuing to enhance our security capabilities both in-house and with the support of partners like AU10TIX.

How merchants can secure their business

There are ways that merchants can best protect themselves from illicit actors and cyberattacks, and at PayU we ensure that our merchants know how they might do this. Below, I’ve outlined some of the key means of doing so, which include adopting 3D-Secure protocols, tokenization and working closely with their PSP to minimise and eliminate ongoing risk.

3-D Secure (3DS) is a protocol designed to be an additional security layer for online credit and debit card transactions. It is formed on the basis of Strong Customer Authentication and requires a minimum of two forms of authentication from the user. This is usually something that only the user knows (password), something the user owns, like a smartphone, and something the user is like a fingerprint. Merchants can incorporate 3DS2 into their checkout process, which can help to eliminate fraud.

Tokenization is also important in securing consumers’ credit card information when an online payment is made. What does tokenization do? Well, it protects sensitive data and decreases the risk of data leaks by generating a unique ‘token’ that the merchant can use to identify their consumer, without the need for their real payment details. The merchant can use the same token to identify a consumer every time they return to shop and an unauthorised party is unable to uncover the original Primary Account Number (PAN). At PayU, we offer merchants a single cross-planform tokenization solution.

Thirdly, I encourage all merchants to work closely with their payment service providers (PSPs) to counter fraud and embrace cutting-edge anti-fraud solutions. PSPs like PayU have access to a variety of innovative technology which often integrates Machine Learning (ML) and Artificial Intelligence (AI) solutions to securely identify and subsequently protect against fraud. 

The future of online payments relies on the protective measures that businesses can implement to ensure security for their internal processes as well as their customers. Fintech and payment companies like PayU are continuously looking at how they can make payments more secure, using advanced anti-fraud systems. With this technology and offering, merchants can retain their reputation and maintain trust with their customers.