Fraudulent transactions continue to increase, creating opportunities for payment security companies that specialize in fraud prevention, mitigation and management.
In our first post, we talked about why integrated payments solutions are positioned well in the large, growing and highly fragmented merchant processing market, a market where LLR is actively investing (read about our platform investment in Celero Commerce). In the following post, we highlight Payment Security as another core sector of interest at LLR.
With the growth of eCommerce and movement of payments online, fraudulent transactions continue to increase, creating opportunities for payment security companies that specialize in fraud prevention, mitigation and management.
Card-Not-Present Fraud Is on the Rise
Card-not-present (CNP) fraud costs ecosystem participants approximately $6 billion per year and that number continues to grow at a rate of 10%+ per annum. The growing CNP problem is the result of several key factors. First, eCommerce is growing at a rate of 15%+ per year and increasing eCommerce volume yields a growing opportunity for fraud. Second, the rollout of EMV has shifted the activities of fraudsters online. Finally, as more merchants support omni-channel commerce and provide consumers with the ability to pay from anywhere, the ease with which consumers can make payments and dispute charges increases exponentially.
Chargebacks Impact the Payment Ecosystem
The Fair Credit Billing Act, a United States federal law enacted in 1974 as an amendment to the Truth in Lending Act, protects consumers from fraudulent charges by giving them the ability to dispute a charge with their credit card provider (issuing bank); this is known as a chargeback. Once that occurs, the consumer’s credit card statement is temporarily credited until the merchant can prove that the payment card transaction is legitimate. As a result of CNP fraud, chargebacks have accelerated and cost ecosystem participants time, money and other resources, leaving the market ripe for solutions to help businesses manage the burden.
Case in point: In 2018, LLR completed a minority investment in Midigator, an industry-leading, fully-automated software platform used to prevent, analyze and manage payment card chargebacks. Key features of the platform include automated chargeback prevention alerts, intelligent chargeback representments (reversals) with industry leading win-rates and real-time data analytics and reporting. Leveraging our investment and partnership, Midigator is expanding its product capabilities to increase revenue and lower costs associated with chargebacks for a growing number of merchants.
Chargebacks have accelerated and cost ecosystem participants time, money and other resources, leaving the market ripe for solutions to help businesses manage the burden.
In our next post, we will explore the B2B payments market opportunity. B2B payments is an attractive FinTech sector where the large market opportunity and lack of digitization to date create major growth opportunities for digital disruptors.