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Higher Level Of Fraud Online Expected This Holiday Shopping Season

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According to new benchmark data from ACI Worldwide, Inc., which powers electronic payments for retailers and processors, consumers should be prepared for higher levels of fraud online during this holiday shopping season.

"When it comes to fraud, 2015 is likely among the riskiest season retailers have ever seen; and it is critical that they prepare for a significant uptick in fraud, particularly within eCommerce channels," said Mike Braatz, senior vice president, Payments Risk Management, ACI Worldwide.

While 1 out of 114 transactions was a fraudulent attempt in 2014, the rate has now increased to 1 out of 86 transactions. The rates by volume have also shot up 30 percent from last year as people use more devices online, and card issuers are not fast enough to shut down accounts after fraudulent activities are identified.

It was expected that with effect from October 1, the shift to more secure EMV chip cards (EMV - a coalition of Europay, MasterCard, and Visa) would make fraudulent transactions difficult for card-present cases. This might persuade fraudsters to turn to e-commerce channels.

However, a report published by The Strawhecker Group, a management consulting firm, says a complete shift will happen only over a period or years, not immediately, for varied reasons including technical challenges.

On the other hand, "Card issuers are still working through their EMV plans, and fraudsters are keenly aware that there are less aggressive controls in EMV entry mode," ACI Worldwide said in a statement.

This year, digital downloads - virtual gift cards, eGifting - has the highest attempted fraud rate, the company said. It also warns that "buy online/pick up in store" - attempted fraud rates are expected to increase 28 percent during the holiday season.

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