Sift, a digital fraud prevention company, agreed to acquire Chargeback, a real-time payments dispute management provider for an undisclosed amount, according to a company blog post on May 25.
The acquisition comes at a time when e-commerce and digital payments fraud are on the rise. According to the U.S. Census Bureau, e-commerce sales (adjusted for seasonal variation, but not for price changes) amounted to $215 billion in Q1 2021, a 7.7% increase from $199.6 billion in Q4 2020. The average value of attempted fraud also increased 69% year-over-year (YoY) in 2020, according to a recent Sift report.
E-commerce retailers are at risk of losing over $20 billion in 2021 due to online fraudulent activities, a Juniper research report found. This loss would represent an 18% increase, compared to $17.5 billion recorded last year. "While the need for security is greater than ever, the competitive e-commerce environment means merchants will need to ensure that extra security checks are justified to the user, or they risk higher cart abandonment rates," Juniper analyst Susan Morrow wrote in the research.
In acquiring Chargeback, Sift absorbs a software-as-a-service provider that helps in real-time dispute management for merchants and customers. Sift expects the integration Chargeback to unfold over the course of 2021, a Sift spokesperson told Payments Dive. Salt Lake City-based Chargeback was founded in 2011 and has raised $15 million since inception.
The pandemic played an influential role in diversifying fraudsters' tactics and targets. As transactions went digital, so did the fraudsters, the Sift spokesperson said. Sift expects to see new and changing fraud tactics, attack strategies, and industry-specific fluctuations surface in the future. The San Francisco-based company anticipates that recently-dormant verticals, like travel and entertainment, will get hit harder in the coming months as the world slowly but steadily reopens, the spokesperson said.
As internet traffic surged last year, the amount of money spent by online shoppers did too. “Fraudsters seized on these climbing transaction volumes and unanticipated consumer behaviors to drive the 2020-2021 average value of attempted fraudulent purchases up by 69% YoY," a first-quarter report from the company said.
Another e-commerce fraud prevention company, Forter, recently raised $300 million to take its valuation to $3 billion.
There are two main types of e-commerce fraud. In one instance, fraudsters use stolen credentials to make unsolicited payments. In another instance, a consumer disputes a charge with the credit card company often under the guise that the merchant never sent an item.
Chargeback’s tools will integrate with the Sift platform and give merchants the ability to fight back against the different types of fraud. Customers can file a dispute regarding a payment made on a purchase and see how the merchant is resolving the issue in real-time.
The integration of the two companies will allow customers to “aggregate and contextualize data throughout the entire transaction process to quickly create unique, intelligent responses for every chargeback dispute,” the spokesperson said in an email.
“Preventing chargeback fraud is the critical ‘last mile’ of stopping payment fraud entirely,” Sift CEO and President Marc Olesen said in the press release. “With the addition of Chargeback’s team, technology, and partners, our customers gain a true hub for fighting all types of fraud and abuse while creating a more seamless experience.
Sift’s data scientist found that between Q1 2021 and May 2021, the average rate of attempted payment fraud blocked by Sift rose by 21%.
Prior to the acquisition, Sift and Chargeback had a technology partnership with an integrated digital hub aimed at preventing chargeback fraud. Fashion retailer The RealReal, members-only e-commerce retailer Touch of Modern, and digital bill payments company Doxo are a few of Chargeback and Sift’s shared customers, the spokesperson said.