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Vesta: What’s the True Cost of Fraud to Your Online Business?

Global e-commerce fraud losses are projected to exceed $37billion annually by 2024 (pre-Covid-19).  While that figure seems daunting, in truth it understates the problem.

E-commerce merchants tend to focus on the financial hit from fraud chargebacks and rightly so since that is where the problem originates. But sadly, that is not where it ends. Here Shabab Muhaddes,
GM, Vesta Asia Pacific explains more.

Shabab Muhaddes Vesta
Shabab Muhaddes,
GM, Vesta Asia Pacific

Just like a photographer needs to adjust their depth of field to bring the entire image into focus, let us take a moment to adjust our perspective on the e-commerce fraud cost landscape.

Impact to your revenue 

Within Asia, especially Southeast Asia, the rate of attempted fraud is up to 12 times greater than the global average and online merchants lose an average 1.6 per cent of revenue to direct fraud each year. Even so, most online merchants will tell you that they don’t have a fraud problem. It may surprise you to hear this, but for the most part, we agree. If merchants had an ongoing fraud problem, then card brands wouldn’t allow them to continue processing on their networks. The question is, what did they do to bring fraud down to an acceptable level? You may have heard it said, ‘It’s easy to eliminate fraud. All you have to do is decline every order’. While that is an obvious exaggeration, there is also some truth in it. Fraud loss and revenue loss are like two opposing weights on a scale  – when fraud loss goes down, revenue loss goes up.

The safeguards implemented by online merchants today have cost them more than the problem they set out to solve. The average online merchant doesn’t have a fraud problem. They have a revenue problem.

Impact to your bottom line

Direct fraud loss is a significant component of the total cost of fraud, but we can’t overlook the fact that it’s also the catalyst for loss in other areas of your business.

Sixty per cent of online businesses have experienced the same or growing fraud losses over the past 12 months. More than 50 per cent have experienced repeated fraud attacks in the form of payment fraud, account takeover and brute force attacks. The pressure on online merchants in Asia to control fraud is mounting. In response, the efforts to battle online fraud has grown more than six per cent annually. Now the average e-commerce merchant spends almost $4 fighting fraud for every $1 of direct fraud loss. Wrapped up in that number are the costs of manual reviews pre and post transactions, staffing (quality control, rules management, IT  programming, chargeback management, reconciliation, salaries), third-party transaction costs and fees for shipping, restocking, marketing and other overheads. Fighting fraud is complex and expensive and each year the problem grows.

How are merchants performing?

Unfortunately, not very well. The safeguards implemented by merchants have cost them more than their fraud problem. Let us look at some stats (pre-Covid), globally, $300billion in revenue is lost annually due to false declines, on average, $30billion indirect fraud losses are incurred, card-not-present (CNP) approval rates average only 83  per cent, compared to 98 per cent for retail sales. In Asia Pacific, the numbers don’t look good – online merchants are leaving far too much revenue on the table due to the fear of fraud, spending more to fight it,  missing the know-how and experiencing customer churn from checkout friction and poor customer experience.

About Vesta

Payment guarantee:  Allows online merchants to remove the barriers they built to protect themselves from fraud. Instead of turning customers away, merchants can tear the walls down and let orders flow in, knowing that guaranteed fraud protection means they will not lose out and drives a better customer experience.

Promise: We increase approvals and grow revenue with 100 per cent fraud chargeback protection. If we are wrong, the fraud is on us. We eliminate the fear and cost.

Technology: For more than 20 years, Vesta has led the way in combatting fraud with our proprietary and patented solutions, using machine learning, real-time fraud analytics, and deep link analysis. Our technology keeps us a step ahead of the bad guys.

Experience: Since 1995, Vesta has been a premier provider of fraud management and payment technologies. We were the first to guarantee e-commerce transactions.


  • Gina is a fintech journalist (BA, MA) who works across broadcast and print. She has written for most national newspapers and started her career in BBC local radio.

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