Card fraud is a significant problem in South Africa and fraud prevention measures will play an increasingly important part in countering fraudsters and protecting genuine consumers as ecommerce activity expands.
Credit card fraud in South Africa increased by 23% to ZAR 453.9 million in 2014 and an ACI Aite study in the same year found that three in ten people have been a victim of fraud in the past five years. While card fraud statistics show an unusual pattern, with troughs and peaks since 2006, in the past three years there has been an upward trend.
Data published by SABRIC (South African Banking Risk Information Centre) shows that Card Not Present (CNP) fraud accounted for 46% of losses, and that 64% of these losses occurred outside South Africa. Counterfeit fraud was 27% of the total but this was down 14% - and 60% of these losses also occurred outside South Africa.
Another major area of concern in South Africa is false application fraud. In 2014 this increased from ZAR 6.2 million to ZAR 78.3 million, an increase that has been ascribed to misuse of online application channels. Account takeover and identity fraud is a growing problem for merchants and consumers worldwide and requires the application of sophisticated fraud prevention tools and techniques to support timely detection.
Ecommerce in South Africa has been described as ‘still in its infancy’, with the potential largely untapped and online sales accounting for little more than 1% of total retail sales in 2014. Nevertheless, US-based global merchant Amazon ranks among the most visited ecommerce websites in the country, while the two largest South African online merchants Kalahari.com and Takealot.com have decided to join forces against increasing local and international competition.
The growth of CNP fraud in South Africa led the Payment Association of South Africa to mandate the use of 3D Secure from February 2014. Increased flexibility in the application of 3D Secure to online transactions has reduced the cart abandonment previously widely reported by merchants. The combination of 3D Secure authentication with other fraud prevention techniques – which can identify and enable genuine transactions that have failed 3DS authentication – also offers a powerful and effective weapon against fraudsters.