Although the global fraud rate was below expected levels in the first half of the year, threat actors managed to evade safeguards leading fraud to spike across multiple categories, according to a Visa report.

Between January and June, the San Francisco-based card giant tracked an uptick in fraud in ransomware attacks, enumeration attacks and card-not-present fraud, according to the most recent edition of its biannual threats report. Among retail-specific crimes, the company highlighted the rise of counterfeit and spoofed merchants, malicious advertisers, flash-fraud scams and free gift scams, according to the Sept. 7 report. 

“While we are pleased by the lower-than-expected fraud rate over the last few months, this edition of the Biannual Threats Report continues to underscore just how savvy fraudsters continue to be,” Visa’s Chief Risk Officer Paul Fabara said in a statement. “The same way criminals take advantage of technology advances, so does Visa, and the $30 billion of fraud prevented in the last six months alone is a great testament to that.”

Ransomware attacks spiked in March, soaring 91% over February numbers and 62% year-over-year, Visa said in its report. The top root causes of ransomware attacks were exploited vulnerabilities (36%) and compromised credentials (29%), according to the report. 

Enumeration attacks jumped 40% during the January to June time period, compared to the previous six months, Visa said. As for card-not-present fraud, more than half (58%) of the fraud and breach investigations stemmed from online merchants. However, brick-and-mortar retailers comprise 20% of card-not-present fraud.

Visa did not disclose how much malicious advertising, spoofed or counterfeit merchant fraud, flash-fraud scams or free gift scams it had detected. It only noted that these categories had seen “a measurable uptick during the past six months.” 

The rise in artificial intelligence is contributing to the increase in some fraud amid an overall decline. As artificial intelligence “continues to proliferate in the market and new use cases evolve, merchants and consumers alike may experience new challenges in identifying and preventing scams,” Michael Jabbara, vice president and global head of fraud services at Visa, told Payments Dive via a spokesperson. 

While ransomware is not a new tactic for threat actors, they are using ChatGPT and advanced language models to “create malware that can act as file stealers while evading detection or generating malware capable of encrypting an entire device,” Jabbara said in the statement. “ChatGPT and other ALMs have lowered the barrier to entry for those with limited programming abilities or technical skill and carry out attacks.”

As of now, Visa continues to see a disproportionate increase in attacks targeting e-commerce, Jabbara added. “We found that merchants in this sector were impacted by 58% of the total fraud and breach investigations and 7% for ransomware fraud schemes,” he continued in the statement. 

While counterfeit merchant attacks involve creating fake sites to steal customer information, malicious advertising attacks use fake ads to gather consumers’ payment information, Visa explained. Flash fraud involves tricking merchants into processing legitimate transactions and then processing a large number of illegitimate transactions using stolen payment information. 

Meanwhile, free gift scams swindle victims by offering them a free gift in a pop-up window that actually links to a “malicious payload” that includes a file with harmful non-fungible tokens, enabling cybercriminals to transfer cryptocurrency from the victim’s digital wallet to their wallet, according to Visa. 

As Visa tracks rising fraud, the company has separately said that its fees support its cybercrime prevention strategy. Though the company said in its report that the global fraud rate “trended lower than normal” during the first half of the year, it noted in a September blog post that cybercrime is at record highs. The fees helped to support its fraud prevention infrastructure, Visa has explained in the past.

Research suggests that card issuers’ efforts to mitigate fraud are beginning to pay off. A December 2022 issue of the industry publication Nilson Report noted that the international card fraud losses for sellers, issuers and acquirers will reach $397.40 billion during the next decade, down from the previous predicted loss of $408.50 billion.

After Worldpay breaks away from its current Fidelity National Information Services parent, it will target e-commerce for growth, FIS CEO Stephanie Ferris said this week.

While providing services to e-commerce merchants currently accounts for about a third of Worldpay’s business, Ferris expects that percentage jump to about half of Worldpay’s business in the future, she said during a Morgan Stanley investor conference on Monday.

“That's really one of the biggest strategic assets for Worldpay, as they go forward,” she said at the conference. “It’s about 30% of the business today. I think we’re expecting over the next two or three years, organically, it would be about 50.”

Aside from organic growth, Jacksonville, Florida-based FIS has said repeatedly that Worldpay will engage in an acquisition strategy to grow too, and Ferris reiterated that plan. While valuations for publicly-traded companies may still be high, private valuations are moving lower, she asserted. Furthermore, Worldpay is likely to pursue targets that aren’t necessarily where competitors are focused, she said, perhaps allowing it to find better pricing.

“There’s going to be big buying opportunities across the board over the next 12 to 18 months, especially as a lot of these one-hit wonders are really starting to look at cash flow, and can they make money,” she said.

Nonetheless, Worldpay won’t make any acquisitions this year or before it’s completely spun off from FIS early next year, Ferris said. The spin-off is on track to be completed in the first quarter of next year. 

At the moment, Worldpay is mainly operating separately from the other FIS businesses, namely the banking and capital markets businesses that will remain after the spin-off. FIS acquired Worldpay for $35 billion in 2019.

“Worldpay has been growing ~20%+ in eComm, and we expect strong growth to continue, with the added benefit of FIS’ international banks as a possible channel,” analysts at the research arm of financial firm Robert W. Baird said in a note to clients on Monday.

Ferris called Worldpay the largest payments processor in the world, but pointed to plenty of competition. Global e-commerce Dutch rival Adyen, U.S. banking giant JPMorgan Chase and digital payments pioneer PayPal’s Braintree unit are all competitors, she said.

Worldpay makes gains principally by taking business from local domestic acquirers, Ferris said. It’s difficult for them and other smaller players to compete with Worldpay, which operates in about 120 currencies and 200 alternative payment methods, she said.

With respect to the health of consumer demand vis-a-vis the Worldpay business, Ferris said consumer demand hasn’t flagged as much as the company expected earlier this year. “We aren’t seeing a consumer slowdown,” she said, noting people are spending less on goods and more on travel and restaurant experiences. 

Ferris predicted that back-to-school spending will be a harbinger for the yearend holiday spending season.

She reiterated that Charles Drucker, with whom she worked previously in the C-suite at Worldpay before it was a part of FIS, is well-equipped to lead Worldpay as CEO after the spin-off.

“He’s going to need M&A capital,” she said of Drucker, noting that he has run the Worldpay business in the past, demonstrating he can identify acquisitions and drive down debt. He may also decide to carve out a new strategic direction over the next couple of years, she said, without providing additional details.

As for the banking side of FIS’s business, the company last week bought the assets of a small business that will be additive there, in what was essentially a technology and talent acquisition, Ferris said, calling it an “immaterial” transaction. She said she doesn’t consider that purchase part of the company’s M&A strategy. It was an apparent reference to the purchase last week of the San Francisco banking-as-a-service startup Bond, though she didn’t name the business.

“Bond will integrate with FIS’s banking capabilities and bring value to existing and new relationships,” the Baird analysts said in their note.

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As software companies continue to gain market share by embedding payments within their solutions, Payments-as-a-Service (PaaS) is emerging as a critical force fuelling their success in redefining the landscape of digital payments. PaaS is a pivotal opportunity for software businesses to outsource their payment processing to specialized providers, reducing the complexity and resources required for them to manage payments independently.

The right PaaS partner can provide the e-commerce technology and expertise to ensure payments are integrated seamlessly, providing a user-friendly and secure payment process that contributes to higher customer satisfaction and loyalty, and in turn, higher completion rates.

Choosing the ideal PaaS provider is a critical decision for your business. Here are some key areas to consider:

• Core features that match your needs: Every business is different and has unique payment needs. Integration ease and customization options are a great starting point. Are you looking for a simple payment link your customers can send along with invoices or by email, a branded form linked from your site, or a customized experience embedded within your software? PaaS platforms that can identify the right integration and tools needed for your business and guide you through every step of the process will significantly reduce technical challenges for your team and help your software standout from the competition. Additionally, choosing a PaaS that provides the latest payment options, like digital wallets, and has the infrastructure to grow with you will help ensure your software is keeping up with evolving customer expectations and increased volume.

• Human customer support: Clients are unlikely to receive adequate support with one-size-fits-all payment solutions that often use chatbots instead of human assistance. PaaS providers with full-service support enable empathetic communication and help during payment issues, leading to increased customer satisfaction. Look for a PaaS provider with call wait times under 5 minutes and emails that are answered within hours, not days. Top PaaS partners can provide support with completing your integration, hassle-free onboarding of your customers, and even marketing opportunities.

• Transparent pricing and fee structure: Clarity in pricing is crucial, making it easy for software companies to understand the costs involved. Unfortunately, some payment processors have hidden fees or unexpected requirements, so choose a PaaS provider with a pricing structure that is transparent, flexible, and tailored to the needs of your business. For example, if you operate a donation or fundraising software for non-profits, you should look for a payment provider that offers charity pricing and full transparency when it comes to settlement timelines and fees.

• Advanced security and compliance: PaaS solutions that offer advanced security measures and handle regulatory compliance can help ensure the protection of sensitive financial data. An ideal PaaS provider acts as a shield, helping to protect software companies from complexities and risks associated with payment processing. They mitigate the risk of fraud and chargebacks with tools like 3D Secure 2.0, tokenization, PCI DSS compliance, and authentication solutions (AVS, CVV). Some can even provide an added layer of security by monitoring all transactions for anything that crosses a specified risk threshold and send alerts or reject transactions right away if they seem suspicious.

• Opportunity for monetization: A strategic move for software companies is opting for a PaaS provider that provides additional avenues for generating funds, as it allows them to diversify revenue streams, increase profit margins, and enhance long-term sustainability. Some PaaS providers allow you to mark-up fees and make commissions. At Worldline, software companies can further increase cash flow with FlexCommissions, a recently launched feature that provides the opportunity to choose the frequency at which they receive their revenue-sharing profits instead of being tied to the standard monthly/30-day payout period.

• Market specialization: Payment partners that are aligned with serving niche verticals add a competitive advantage for software companies by elevating their offerings and customer experience. Choose a PaaS provider who can help keep your finger on the pulse of the industry and can recommend products and services suited to your market, like a checkout flow that can reduce cart abandonment for the restaurants/order ahead industry, or recurring billing and batch processing options for businesses with membership or subscription services.

Payments-as-a-Service is reshaping the future of digital payments. The right PaaS partner can enhance user experiences, ensure security and compliance, and provide growth potential to software companies, making this pairing a success. Software companies adopting PaaS are poised to thrive in the evolving digital payments landscape, creating a win-win scenario for themselves and their customers. So, choose a payment processor partnership that you can trust to deliver a secure, reliable, and flexible payments experience for your customers.

Checkout Worldline to learn more about PaaS and how you can grow your software through payments.

Dive Brief:

• E-commerce giant Amazon said it is expanding its buy now, pay later offering beyond its website and app, by making it available through the Amazon Pay tool on other retailers’ sites, according to an email sent to Payments Dive. A spokesperson didn’t immediately respond to a question on when that change occurred.
• “Amazon Pay merchants now have yet another way to seamlessly reach new customers, offering them more choice and convenience in how they pay,” Amazon Pay Director Omar Soudodi said in the email.
• Customers can use Amazon Pay’s equal monthly payments option for online checkout purchases of $50 or more and split payments over six or 12 months with 0% interest. This BNPL option is only available to customers using Amazon’s Visa credit cards.

Dive Insight:

The equal monthly payments offering is now available at tens of thousands of other online stores, including Lenovo, Tennis Express and Authentic Watches, according to the email. The company first began offering that BNPL financing in 2018, according to a spokesperson.

Millions of customers have used the BNPL option when it was available only on Amazon.com, according to the company. The new feature doesn’t require any change to e-commerce sites currently using the Amazon Pay checkout button.

The Seattle-based online retailer has a suite of existing payment plan options. In 2021, it allowed BNPL company Affirm as a checkout option on the Amazon website.

Coming soon to physical stores will be Amazon’s palm recognition and payment system. Last month, the company announced plans to roll out its Amazon One biometric service to every one of its Whole Foods grocery stores.

Dive Brief:

• Mastercard’s SpendingPulse report predicts that U.S. year-end holiday spending between Nov. 1 and Dec. 24 will increase by 3.7% compared to last year. The figure is not adjusted for inflation.
• Spending is expected to increase 6.7% year-over-year for e-commerce purchases and 2.9% from the previous year for in-store sales, according to the report.
• Electronics sales are projected to grow 6% from last year, with the next biggest increase being for restaurant spending (5.4%) and groceries (3.9%). Apparel purchases, however, are only expected to rise by 1%, and jewelry spending could dip by 0.3%, according to the report from the card network company.

Dive Insight:

Judging from the recent Mastercard SpendingPulse report, this year’s holiday season will look slightly different than in 2022. Last year, the card giant’s holiday report estimated that consumers would spend 7.1% more than they did during the 2021 holiday season. Plus, the report anticipated a bigger uptick in e-commerce and in-store spending at 4.2% and 7.9%, respectively. 

Inflation may have a dampening effect on consumer spending this year. While the rate of inflation has generally begun to cool, it had a slight uptick in August, according to the most recent Consumer Price Index report. The CPI rose 0.6% in August and 0.2% in July. “Over the last 12 months, the all items index increased 3.7 percent before seasonal adjustment,” the report said.

Meanwhile, the Federal Reserve announced Wednesday that it will pause its interest rate increases, at least for now, and hold the federal funds rate between 5.25% and 5.5%, according to CBS News.

In its report, Mastercard noted that the state of the economy, particularly the labor market, household savings and consumer access to credit will play a role in consumer spending during the upcoming holiday season. Inflation and interest rates could also shed light on what products consumers may buy over the holidays, according to the report. 

“While the consumer of holidays past may have been a consumer trying to find footing in a rapidly shifting economy, the consumer of holidays present has taken their power back,” Michelle Meyer, U.S. chief economist at the Mastercard Economics Institute, said in a statement. “We expect these individuals to impressively navigate the holiday season, making choices and trade-offs that best suit their lifestyles.” 

Dive Brief:

• Dutch fintech Adyen aims to give Canadian e-commerce company Shopify a leg up as Shopify pursues larger merchant clients.
• Shopify is upgrading its payment gateway integration with Adyen to offer more payment choices more easily, in an effort to serve bigger merchants on the international stage, Shopify said in a Wednesday news release.
• That integration, expected to occur later this year, will make it simpler for large merchants working with Shopify to accept payments, including credit cards, digital wallets such as Apple Pay and Google Pay, and others such as iDEAL in the Netherlands and Cartes Bancaires in France, Shopify said in the release.

Dive Insight:

The move reflects Shopify’s ongoing pursuit of larger merchants to fuel growth. The company, which competes with tech companies such as BigCommerce and Salesforce in offering software services to retailers, has sought to expand beyond small and mid-sized businesses, especially as e-commerce growth has slowed. 

In January, Shopify introduced a service that gives large retailers the ability to select the Shopify tools they want, including the checkout function or social commerce. Larger clients using Shopify already include beauty products company Coty, shoe-maker Steve Madden and office supply retailer Staples.

Adyen previously provided card payment capabilities to Shopify, said Davi Strazza, president of North America at Adyen. The expanded partnership’s new integration “includes diversified payment options and global acquiring solutions that will help Shopify’s enterprise businesses grow internationally at accelerated speeds,” Strazza said in an email.

Adyen’s financial technology tools and services designed for large businesses assist Shopify in attracting bigger customers, with “the flexibility and modular approach that is needed for large businesses,” Strazza said.

Shopify also said Wednesday it’s making its checkout tool Shop Pay, which saves customers’ billing and shipping information, available to large retailers not on Shopify. That tool is used by about 100 million consumers globally, according to Shopify. 

Adyen was able to meet Shopify’s needs because of its focus on very large merchants, said Brian Dammeir, Adyen's global head of unified commerce. "We've really figured out what those customers need, and we continue to fill that mission," Dammeir said in an interview.