• Yitz Mendlowitz

E-commerce is exploding. PAAY is helping merchants scale to the growing demands and threats.

Updated: Apr 12

Globally, e-commerce has been accelerating at an incredible rate for over a decade. Conceptually, that’s likely not a massive surprise to anyone within the supply chain. As the online economy accelerates, retailers are looking for solutions to minimize fraud, manage increased transactions, and grow during an unprecedented era.

But the numbers behind this growth are staggering. In 2010, 6.4% of U.S. commerce was online. By 2015, that number had grown to 10.7%. In 2019, we’d already reached 16%. That percentage was expected to rise again in 2020. And then came the global COVID-19 crisis.

With people staying at home more than at any time in the online era—and brick and mortar merchants shuttered in many places—the expected growth of online retail has accelerated at unprecedented rates. While we don’t yet know how long this spike will last, it both presents opportunities and exposes issues within the U.S. e-commerce system.

Security as e-commerce expands

Retailers with a model in place to ramp up online sales are seeing record numbers. Unfortunately, fraud rates are growing in parallel. Global e-commerce is expected to hit $4.9 trillion by 2021 and projected fraud is expected to reach $140 billion by 2025. Because of this, fraud prevention and cyber security have quickly become top of mind for online retailers. Now more than ever it is essential that businesses take measures to protect themselves from lost and stolen fraud as well as friendly fraud.

Lost and Stolen fraud

The people who commit lost and stolen fraud are looking for ways to attack and exploit the payments system as e-commerce rates explode and merchants move more products and services online. Typically, this results in stolen credit card information.

No one who is online is immune to these fraudsters; in fact, PAAY recently had a security breach—an isolated incident that we quickly learned of and corrected. While we don’t believe at this time that any cardholder information that can be used to enact purchases was compromised, we take this event incredibly seriously. In response to the breach we are conducting a third-party audit, and will release the results as soon as we have them. It’s important for us to openly and transparently communicate this issue with our community and to take this as an opportunity to address lost and stolen fraud.

As members of EMVCo, a governing body that facilitates worldwide interoperability and acceptance of secure payment transactions; we are committed to collaborating with the brightest minds in the payment space to develop and implement security solutions for the remote commerce era.

The payment ecosystem is reaching a tipping point, and transitioning from a focus on card present to card-not-present commerce. Our vision to combat lost and stolen fraud is to transform the payment space so that merchants never have to worry about handling credit card data.

Friendly fraud

Unlike lost and stolen fraud, friendly fraud is not the result of lost or stolen credit card information. It is the result of a fraudulent chargeback. In this case, retailers:

  • lose the merchandise that was ordered

  • have to pay back the purchase price (also called chargeback)

  • may be subject to fines or further penalization from the card brands and banks.

Similar to lost and stolen fraud, it is becoming a larger problem for merchants as e-commerce sales increase. In fact, 86% of all online fraud is friendly fraud. Similar to lost and stolen fraud, the payment ecosystem is at a tipping point when it comes to providing merchants with a scalable solution for this problem.

Roughly 30 years ago, when e-commerce was embryonic Mastercard and Visa knew that lost and stolen and friendly fraud were both important issues to resolve and as a solution to this, they launched 3-D Secure (3DS). A security program to prevent unauthorized CNP transactions, and to protect merchants from fraudulent chargebacks.

Unfortunately, the roll-out of this solution was poor, and left a tainted impression across the payment ecosystem. At the time, merchants and payment service providers had difficulty adopting the solution because it created friction at checkout.

How PAAY reduces friendly fraud while creating a better end-user interaction

PAAY is laser focused on providing merchants all the benefits of EMV 3DS, without the shortcomings that traditionally come with it. As a certified provider of EMV 3DS we have developed a scalable SaaS solution that is designed to meet the needs of modern day merchants.

Merchants need protection against fraud, but they can’t afford anything that creates cart abandonment, or losses due to false declines. With this in mind, we’ve created a solution that authenticates cardholders with no impact on the customer experience at checkout. Utilizing risk based authentication, PAAY’s solution happens behind the scenes where it verifies the card holder discreetly without them knowing it’s happening. Once verified, it shifts the liability for friendly fraud off the merchant and onto the issuing bank. Our SaaS also increases approval rates, and massively reduces the number of false declines, increasing revenue for merchants. What PAAY delivered for merchants using the legacy version of 3DS was really revolutionary, in fact many of the principles PAAY exploited went into the development of the new, current version of 3DS.

As e-commerce accelerates—and particularly during the current global difficulties—the need for secure, compliant, scalable, and seamless payment processing is imperative. PAAY will continue to innovate and create solutions simple and agile to support merchants and facilitate easier end-user interactions.

To learn more about PAAY, our products, and our security protocols, visit

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