Growing a successful retail business brings with it a unique set of opportunities and challenges. But one risk looms larger than most: the threat of fraud. The rapid growth of online shopping, coupled with increasing consumer demand for a frictionless experience, has created the perfect storm for criminals.
“While shoplifting still poses a very clear threat to the retail industry, it is the pervasiveness of smart phones, and with it the staggering growth in digital fraud, that has become the leading concern for businesses,” says Eric Horgan, chief product officer, Europe at Elavon, a payment-solutions provider.
The UK has one of the highest rates of card fraud in Europe. In 2023, £1.17bn was lost to fraudulent activity, according to UK Finance’s Annual Fraud Report 2024.
Against this backdrop, the need for robust security defences has never been greater.
“The challenge facing retailers is that the threat of fraud is widespread and multifaceted. It is not simply a case of deploying in-store defences to protect against theft or fraudulent activity. Today, retailers have to contend with payment fraud, returns fraud and data theft, all while the methods of criminals are growing more sophisticated and insidious,” explains Horgan.
“At the same time, customers expect a good shopping experience. For retailers, striking the right balance between effective security and a frictionless, seamless customer experience is paramount.”
While ecommerce fraud can take various guises, the most common form is the use of stolen payment-card information to make unauthorised transactions.
Today, retailers have to contend with payment fraud, returns fraud and data theft, all while the methods of criminals are growing more sophisticated and insidious
To combat this threat, retailers must adopt multilayered authentication processes, including advanced data encryption, two-factor authentication and real-time transaction monitoring and threat detection.
For Horgan, payment solutions that include encryption and tokenisation to protect card data are crucial. When a payment card is swiped or inserted, encryption ensures that the card data is protected as it travels across various systems and networks. At the same time, tokenisation replaces cardholder data with a unique token value that is substituted for the payment data in the processing environment.
Taking steps to safeguard payment details not only helps to prevent losses, it can also boost customer trust. According to Visa research, 60% of consumers say security is the most critical aspect of payment. Yet, tellingly, only 37% feel their data is secure when paying via smartphone at checkout.
“These figures highlight the importance of partnering with a payments provider that adheres to stringent regulations, such as the Payment Card Industry Data Security Standard (PCI DSS),” says Horgan. “Businesses, regardless of their size, are required to comply with these standards. But self-certifying data and navigating the complexities of data security can be a minefield.”
If businesses fail to maintain compliance, they may find themselves liable for fraudulent transactions. And, financial losses are not the only risk. In today’s digital era, negative reviews can have a devastating impact on a business’s reputation too.
Strategic fraud detection
Retailers should also have robust processes in place to identify potential red flags, says Horgan. Unsurprisingly, fraudsters often have a short amount of time to use a stolen card, so monitoring transactions for unusual activity, such as different delivery and billing addresses, or multiple high-value purchases in a short period, can help to detect fraud.
“No one knows the customer as well as the retailer does, so monitoring activity to detect regions or markets where fraud is more prevalent can help prevent unusual or suspicious activity and add an extra line of defence in the fight against fraud,” says Horgan.
Similarly, using technology, including artificial intelligence and machine learning, enables retailers to analyse data on a large scale and identify different behaviours, patterns and anomalies. Being able to spot bad actors helps to minimise the need for additional security checks, reducing unnecessary friction for genuine customers and improving cart abandonment rates.
But fraud is not solely limited to customer activity: a worrisome rise in phishing attacks is putting retailers themselves at risk of data breaches. These attacks, which often involve targeting staff by posing as legitimate entities to steal sensitive information, have surged in popularity. When it comes to preventing this level of threat, education is the best defence, says Horgan.
“Fraudsters use a number of different tactics to commit their crimes. It’s important that retailers understand the full fraud landscape and put up defences right across the board, including security software, multi-factor authentication and awareness training for staff,” he explains.
Scalable solutions and seamless integration
As businesses grow and expand, the volume of payment transactions increases, as does the risk of fraudulent activity. That is why it’s important to build a payments infrastructure with growth and integration in mind.
“All businesses want to grow and as they do, they may find that their basic payment infrastructure is no longer up to the job. This can have a knock-on effect on customer experience and revenue,” explains Horgan. “Whether it is a spike in sales, opening new branches or entering new markets, retailers should be looking for a payments solution that can be easily integrated into existing systems and has added features that can be changed and adapted as the business’s needs evolve.”
This need for flexibility is something that Motorpoint, an Elavon customer, knows all too well. The car dealership has worked with Elavon for more than 10 years and, in that time, has needed to roll out payment solutions across new store locations.
Heather Whitmore, head of finance operations at Motorpoint, says: “Elavon provides Motorpoint with an off-the-shelf payment solution. The car-buying process has changed so much over the past few years, it’s been vital to introduce new payment methods, so car buyers can pay how they feel most comfortable. With Elavon, we could do that.”
Car sales also mean high-value transactions, which heightens the need for them to be processed and approved seamlessly. “Elavon’s ability to easily integrate with Motorpoint’s other payment solutions has been essential to ensuring the seamless introduction of new payment options,” adds Whitmore.
As the payments industry continues to innovate and fraudsters hone their techniques, the stakes are high. Retailers cannot afford to be reactive. But with the best will in the world, they cannot go it alone, says Horgan.
“Choosing the right payment provider is essential. Protecting your business is not just about preventing financial losses: it’s about ensuring the long-term survival and growth of the business.”
Learn more about how Elavon works with Motorpoint to provide secure, multichannel payments
U.S. Bank Europe DAC, trading as Elavon Merchant Services, is a credit institution authorised and regulated by the Central Bank of Ireland. Authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request.
Growing a successful retail business brings with it a unique set of opportunities and challenges. But one risk looms larger than most: the threat of fraud. The rapid growth of online shopping, coupled with increasing consumer demand for a frictionless experience, has created the perfect storm for criminals.
“While shoplifting still poses a very clear threat to the retail industry, it is the pervasiveness of smart phones, and with it the staggering growth in digital fraud, that has become the leading concern for businesses,” says Eric Horgan, chief product officer, Europe at Elavon, a payment-solutions provider.
The UK has one of the highest rates of card fraud in Europe. In 2023, £1.17bn was lost to fraudulent activity, according to UK Finance’s Annual Fraud Report 2024.
