In 2024, the payments landscape is shaped by rapid technological advancements and the increasing consumer preference for digital channels across verticals, including shopping, banking, and entertainment.
As these trends accelerate, merchants and issuers are confronted with the challenge of prioritizing initiatives that reduce an ever-growing fraud threat and enhance customer satisfaction, operational efficiency, and revenue growth.
Ethoca’s “2024 Outlook: Strategic Insights for Issuers and Merchants” offers a comprehensive analysis of these evolving dynamics, underscoring the critical need for businesses and financial institutions to strategically adapt to shifting consumer behaviors and the technological transformations defining the payments ecosystem.
Evolving Consumer Expectations
The report highlights a significant shift in consumer behavior, with a marked preference for digital experiences across all sectors. As consumers increasingly gravitate towards integrated digital solutions—often called "super-apps," merchants and issuers must recognize that offering a seamless digital experience is necessary. They must maintain an acute awareness of dynamic and multifaceted consumer needs to succeed.
The data indicates that 50% of consumers have investigated transactions they did not recognize, with 24% doing so due to confusion over purchases.
This statistic reveals a critical gap in transaction transparency that businesses must address. Implementing digital receipts within banking apps enhances consumer understanding and alleviates the operational burden on issuers and merchants by reducing customer service inquiries related to transaction confusion.
Chargebacks on the Rise
The whitepaper forecasts a substantial increase in global chargeback volumes, projected to reach 337 million transactions by 2026, representing a 42% rise from 2023. The growth of e-commerce and mobile payments largely drives this escalation.
Notably, U.S. merchants are projected to face a disproportionate share of this burden, with chargeback volumes expected to hit 146 million, translating to financial losses exceeding $15.3 billion (about $47 per person in the US).
The report emphasizes the necessity for businesses to refine their chargeback prevention strategies. Automation in dispute resolution and leveraging collaboration networks for real-time payments intelligence are recommended as critical measures to mitigate the impact of rising chargebacks.
First-Party Fraud: A Growing Concern
The report focuses heavily on the increasing threat of first-party or "friendly” fraud, which occurs when consumers initiate chargebacks for legitimate transactions.
The report reveals that 75% of fraud experienced by digital goods merchants is attributed to first-party fraud.
The report recommends greater collaboration between merchants and issuers to provide better data insights that allow them to identify genuine transactions, reduce the incidence of first-party fraud, and enhance overall transaction integrity.
CNP Fraud Continues to Grow
Driven by steady expansion in digital payment offerings, losses from CNP fraud are expected to reach $28 billion by 2026. The Annual CNP fraud growth is estimated at 13% in the U.S.
The report urges merchants to implement robust fraud prevention measures while acknowledging that they must be balanced with minimizing transactional friction.
The trends highlighted in Ethoca’s 2024 Outlook underscore the urgent need for merchants and issuers to adapt their fraud prevention strategies to keep pace with an evolving payments ecosystem. As digital transactions continue to dominate, the rise in chargebacks, first-party fraud, and card-not-present (CNP) fraud pose significant risks that demand proactive, sophisticated responses that don’t impose undue burden on consumers.
At REDi, we recognize that the key to effective fraud prevention lies in harnessing real-time data and leveraging advanced technologies like AI and machine learning. These tools enable us to provide businesses with accurate, actionable insights that help prevent fraudulent activities before they impact the bottom line.
Our solutions are designed to address the full spectrum of fraud risks, from mitigating chargebacks to combating first-party fraud, all while ensuring a seamless and secure customer experience.
Get in touch with us to learn more about our fraud prevention solution.