The payment intelligence company Fraugster has just released its debut Payment Intelligence report, detailing the key compliance, fraud risk and revenue uplift trends that dominated the market in 2021.

Its findings were derived from 60 billion data points and a further 80 million transactions. Findings highlight the latest fraud tactics being deployed against payment service providers (PSPs), buy now pay later (BNPL) suppliers and merchants in travel, physical and digital goods.

The data also delved into the various challenges and opportunities facing players in the emerging BNPL market, intersliced with insights into the most prominent chargeback trends, popular fraud types, PSD2 impacts and future trends for 2022 and beyond.

The report’s most alarming findings were found across its investigation into fraud trends, which underscored how €80billion was lost to online fraud across physical and digital goods and e-ticketing in 2021.

Here, The Fintech Times breaks down the main chapters of the report:

2021 saw a massive increase in fraud cases across the industry, including a considerable 109 per cent increase in identity fraud, a 70 per cent increase in gift card-related fraud alongside a 52 per cent increase in account takeover attacks.

In regards to average order valuea by vertical, of which the report provided a comprehensive insight, travel naturally received the highest average at €580 as international travel slowly resumed service following the worldwide Covid-19 pandemic.

This was succeeded by physical goods at €147, BNPL at €146 and digital goods at €20.

The report identified Iran, Syria and North Korea among the most economically sactioned countries of 2021, a list that was joined by Russia following its invasion of Ukraine in February 2022.

Where anti-money laundering (AML) was concerned, 2021 saw a total of €2.5billion in fines being delivered to 80 institutions across the industry.

In 2021, 46 per cent of chargebacks were filed within 60 days. Before the pandemic, 15 per cent of these were angry chargebacks, but this figure increased to 50 per cent at the height of the pandemic.

In terms of the average chargeback value by vertical, travel came out on top again at €710, followed by fashion with €220 and gaming at €25. The report found that merchants were paying 2.9-times the original face value when administering these chargebacks.

Bad debts (debts that are unable to be recovered) as a percentage of total outstanding debt for credit cards stood at 5.3 per cent in 2021, but rose considerably to an estimated 9.55 per cent for BNPL providers; in tandem with the rising popularity of alternative financing platforms.

According to the report, 2021 saw a 62 per cent growth in new users adopting BNPL services, with those aged between 18 and 24 being the most prolific users.

Between 20 and 50 per cent of merchants’ transaction flow was redirected to frictionless 3DS last year, indicating a decrease in issuer declines post 3DS. This compensates for customer drop-offs, therefore, balancing overall acceptance rates.

Airlines lost over €6.5billion to fraud in 2021, which is equivalent to the global average cost of 24,000 flight tickets with fraud losses amounting to 1.5 per cent of total global airline revenue.

Total direct fraud losses for digital goods (consisting of gaming, gambling and gift cards) amounted to €3.58billion in 2021, with over €13.72billion worth of genuine transactions lost due to false positives.

 Fashion had the highest percentage contribution to revenue at 28 per cent, followed by home and living at 22 per cent, electronics at 19 per cent, food and personal care at 18 per cent and furniture at 13 per cent. In total, nearly €69.65billion from the total revenue for physical goods was lost to fraud in 2021.

Christian Mangold

Speaking on the findings of the report, the company’s CEO, Christian Mangold, confirmed the company’s pride in publishing its first report of this kind.

“By researching our own data we gleaned information about compliance, fraud risk and revenue uplift that will enable us to adjust where required to ensure that our merchants can minimise fraud and maximise revenues,” he explained.

View Fraugster’s full Payment Intelligence report here.

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