“Security is Sales Defense”: Japan's E-Commerce Market Strategy for 2026, Where Fraud Prevention Becomes a Competitive Advantage

あゆみ佐藤
5 days ago
5 min read

Introduction: What ¥55.5 Billion in Losses Really Means

In 2024, losses from credit card fraud in Japan reached ¥55.5 billion, the worst level on record. More importantly, over 90% (¥51.35 billion; about 92%) of that damage came from card-not-present “card number theft”—fraud occurring primarily in e-commerce environments.

This is not a niche “security issue.” In Japan’s e-commerce market, fraud prevention is now a board-level topic that directly affects revenue, profitability, and brand trust.

By 2026, a decisive gap will emerge between companies that treat security as a core growth and revenue-protection lever and those that continue to view it as a cost or a technical afterthought.

How Fraud Has Evolved: Broader Targets and a “Division of Labor”

Recent fraud trends show two major shifts.

First, targets have expanded. Historically, fraud concentrated on high-value, high-resale items—electronics, luxury goods, precious metals. Today, fraud increasingly spreads into a wider set of products and services, including areas like donation/reward programs and subscription-based rentals where high-ticket items can be exploited.

Second, fraud has become industrialized and specialized. Increasingly, the person who steals card credentials is not the same person who places fraudulent orders, and not the same person who receives or resells goods. Attackers operate like a supply chain—credential theft, account takeover, purchasing, delivery manipulation, and resale are often separated roles.

This structural change makes one thing clear: protecting “the payment moment” alone is no longer enough. Attacks are distributed across the entire journey—login, browsing, checkout, payment, fulfillment, and delivery.

The Reality After EMV 3-D Secure: Security vs. Purchase Experience

Japan’s approach to card security tightened materially with the release of the Credit Card Security Guidelines 6.0, published on March 5, 2025. In practice, e-commerce merchants were strongly pushed to complete readiness by March 31, 2025, with principle-based enforcement from April 1, 2025. A central requirement is the adoption of EMV 3-D Secure (3DS 2.0).

EMV 3DS is designed to reduce “card number theft” fraud through issuer-led authentication. Its effectiveness has been demonstrated through real operational cases. For example, Mercari reported that after deploying EMV 3DS, it reduced fraud amounts by about 90%, while keeping incremental abandonment around ~2%—showing that “3DS always causes severe cart abandonment” is not a fixed truth. Execution matters.

That said, 3DS adoption can produce short-term friction if implementations are not optimized. Case-based analyses have reported that “3DS-specific errors” can depress authorization rates during early rollout. In some published summaries, an average authorization drop of roughly 17.75% has been observed in certain contexts, while other cases saw a 10–15% dip initially but recovered within months after tuning and operational improvements.

This is the core competitive point for 2026:the question is no longer “Do you adopt 3DS?”—it is whether you can restore and improve authorization and customer experience after adoption.

Risk-Based Authentication: The Engine That Balances Security and Conversion

The key to resolving the security–experience dilemma is Risk-Based Authentication (RBA) within EMV 3DS 2.0. RBA evaluates transaction risk in real time and applies stronger authentication only when needed.

Frictionless flow: for low-risk transactions, additional verification is minimized
Challenge flow: for higher-risk transactions, step-up verification is required (OTP, biometric methods, etc.)

RBA is not “making everyone authenticate more.” It is making high-risk users authenticate more, while protecting the majority of legitimate buyers from unnecessary friction.

In 2026 operations, competitiveness will increasingly depend on how well a merchant can tune and operationalize RBA to achieve both fraud reduction and revenue protection.

Why Authentication Alone Isn’t Enough: Fraud Detection Systems (FDS) Become Mandatory

Even with 3DS, fraud does not disappear. One major modern risk is account takeover (ATO), where attackers log in with compromised credentials and behave like “legitimate users.” In such cases, authentication can be bypassed or completed, and fraud can still occur.

That is why a Fraud Detection System (FDS) becomes essential. Machine-learning-driven FDS typically works in three layers:

Baseline learning: learn “normal” transaction behavior from historical data
Anomaly detection: detect deviations across time, geography, device, payment behavior, shipping patterns, and more
Action controls: hold, review, step up verification, or reject suspicious transactions

Rule-based systems remain effective against known patterns, but they struggle to keep up with rapidly evolving tactics. ML-driven systems can detect “unknown fraud” as abnormal behavior—making them increasingly standard for serious e-commerce operations heading into 2026.

Chargebacks and Merchant Screening: Security Becomes a Condition for Operating

As fraud rises, chargebacks rise. Chargebacks reverse revenue when cardholders dispute transactions due to fraud or non-delivery.

A critical concept here is the liability shift: generally, when a merchant is properly enabled for EMV 3DS and transactions are authenticated under required conditions, the merchant’s chargeback exposure can be reduced, while non-compliant or poorly implemented environments may carry higher merchant-side liability.

As a result, payment partners and card networks tend to tighten screening and commercial conditions for merchants with high chargeback rates or weak controls—especially in categories known for higher fraud risk (digital goods, tickets, high-resale products, etc.).

In other words, security is no longer only “loss prevention.” It increasingly becomes a commercial requirement for stable payment acceptance.

The 2026 Standard: Tiered Risk Controls and Layered Defense

By 2026, best practice moves toward tiered risk controls—applying defenses based on risk level while preserving conversion:

Low risk: frictionless verification as default
Medium risk: step-up verification (OTP, etc.)
High risk: stronger step-up (biometric/device-based verification), plus delivery and transaction controls

This works only when merchants implement layered defense—not one single tool, but a coordinated system:

Pre-payment: account security, MFA, device intelligence, access controls, bot mitigation
At payment: EMV 3DS + RBA tuning
Post-payment: FDS monitoring, hold/review operations, shipping controls, blacklists/allowlists, and investigation workflows

For 2026, the competitive baseline is not “having security.” It is having security that protects revenue while keeping the buying experience smooth.

A Realistic 3-Phase Implementation Roadmap for 2026

Below is a practical roadmap for e-commerce operators (domestic and overseas) entering or scaling in Japan. Costs vary widely by scale, architecture, and outsourcing scope, so these are directional:

Phase 1 (Jan–Mar): Baseline security and vulnerability hardening

third-party vulnerability assessment and remediation
admin access control and credential management
TLS configuration checks, logging/monitoring foundations
malware defenses and incident-response procedures
internal training and operational playbooks

Phase 2 (Feb–Apr): EMV 3DS 2.0 + RBA operational optimization

select and implement a 3DS-ready PSP
design the RBA experience for minimal friction
strengthen account takeover defenses (MFA, device intelligence, bot control)

Phase 3 (Mar–Jun): ML-driven FDS deployment + continuous tuning

deploy ML-driven FDS and train on your transaction data
operationalize hold/review, shipping controls, and escalation flows
run monthly PDCA across fraud metrics and authorization/conversion metrics

The value is not only “reducing fraud.” It is protecting revenue by preventing leakage at the most sensitive stage of the funnel—and building a durable reputation for safety and reliability.

Why Security Becomes Competitive Advantage

Here is the key point: in Japan, security investment increasingly shifts from “risk management” to revenue protection and growth strategy.

Japanese consumers tend to be highly sensitive to trust signals. When buyers experience suspicious login flows, unclear verification screens, or payment friction, they abandon quickly—and often do not return. Strong security therefore creates more than loss reduction: it builds brand trust as an intangible asset, which outlasts short-term discounts or ad spikes.

Conclusion: Security Is Business Strategy

In Japan’s e-commerce market, fraud prevention is no longer a technical department issue. The scale of damage, the concentration of card number theft in e-commerce, tightened guideline expectations, and the commercial realities of chargebacks and merchant screening all combine into one outcome:

By 2026, companies that treat security as a core strategic capability will protect revenue, preserve conversion, and accumulate trust—while those that do not will face rising losses, unstable payment acceptance, and brand erosion.

For overseas manufacturers scaling in Japan, the priority is clear:build security not as an “add-on,” but as a core operating system—and start early in 2026.

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