Is Your Business Prepared for The Rise in Online Fraud? New Research Shows the Real Cost of Fraud
New PayPal Fraud Protection Solution Addresses Growing Threats Facing Merchants

Rahul Pangam, Vice President Risk Strategy at PayPal

This past year saw an exponential growth and reliance on digital commerce as consumer behavior around the world adapted to a new normal. In the U.S. alone, ecommerce penetration hit an all-time high of 21.3% in 2020, a more than 5% gain from online retail sales the previous year, according to DigitalCommerce3601. But while this rise in ecommerce and digital payments has opened up new revenue potential for merchants, it has also led to an increase in online scams2, sophisticated attempts at fraud by malicious actors and resulting new operating risks for merchants.

According to a new study, “The Real Cost of Online Fraud,3 from the Ponemon Institute and sponsored by PayPal, the number one challenge organizations are facing when it comes to preventing this rise in online fraud and risk is battling the increasing sophistication of fraudsters. This is followed closely by not having the right tools or practices in place to mitigate online fraud or achieve compliance with IT security and privacy regulations.

To help address these trends and the growing threat, PayPal has now launched Fraud Protection Advanced, an enhanced risk management solution for mid-market and enterprise businesses.


The Real Cost of Online Fraud

The new research sought to understand the current fraud landscape, barriers and challenges organizations face in mitigating the risk of online fraud and the resulting financial losses.

Of the more than 600 analysts and senior leaders surveyed in key verticals including retail, travel, hospitality and entertainment, it was reported that organizations are losing an average of $4.5 million per year due to online fraudulent transactions. Despite these losses, only half (51%) say their organizations are prioritizing protecting online financial transactions.

Furthermore, respondents indicated that COVID-19 has seriously affected their organizations’ ability to protect themselves from online fraud. Prior to COVID-19, 45% of respondents rated their effectiveness in reducing online fraud as high or very high. Today, only 34% of respondents rate their effectiveness as high or very high.

Many businesses have seen the rise in ecommerce as an opportunity to reprioritize their digital transformation initiatives. While digital transformation is crucial to the success and longevity of a business, 81% of respondents indicated their organizations are more vulnerable as a result of digital transformation.

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PayPal Launches Fraud Protection Advanced

To help merchants navigate the increasingly complex digital landscape and rise in fraud, PayPal has introduced Fraud Protection Advanced. This enhanced tool is built on insights from our deep industry partnerships and more than 20 years of data harnessed from our two-sided network of both merchants and consumers across 15 billion transactions annually. With our sophisticated machine learning and analytics capabilities, we are now able to take these insights and offer them to merchants to help them identify, investigate, resolve and mitigate fraud.

Since there is no one size fits all when it comes to fraud prevention, this new solution provides merchants with powerful features and the ability to customize the offering to meet their unique needs.

  • Custom filters: In addition to a set of custom filters created for merchants at on-boarding, merchants are able to create new filters leveraging more than 200 pre-calculated features, risk scores, block and allow lists and custom fields. These filters can be tested on a merchant’s historical transaction data to help understand the impact of the filters before they are activated.
  • Graph-based Case Management: The graph view visually depicts how transactions are linked through shared attributes, enabling merchants to better analyze and understand the transaction under review in conjunction with other connected transactions and their shared attributes.

By reducing merchant's exposure to fraud and offering the ability to differentiate between legitimate and non-legitimate transactions, we are able to help merchants increase their authorization and conversion rates.

Unlike other solutions on the market, merchants who are already processing with Braintree are able to access Fraud Protection Advanced almost immediately instead of having to wait weeks to months for a new solution to be installed.


The Suite of Fraud Protection Capabilities

Fraud Protection Advanced builds on our existing Fraud Protection solution and is part of our larger suite of offerings for merchants in the PayPal Commerce Platform that help them to manage risk and payments.

As we build on these solutions, we will continue our commitment to democratizing access to critical tools and resources for all merchants that help better protect their businesses.

To learn more about Fraud Protection Advanced visit the product homepage and view the full Ponemon study here. Fraud Protection Advanced is currently available globally wherever Braintree is available.


1Digital Commerce 360, U.S. Department of Commerce; Updated January 2021,

2Online Purchase Scams Report 2020, Better Business Bureau Institute for Marketplace Trust,  

3The research was conducted by the Ponemon Institute and commissioned by PayPal. It examines survey data from 632 individuals from December 22, 2020 to January 8, 2021.


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