December 27, 2004, 12:00 AM

Nearly half of online merchants expect fraud to rise in 2005, study says

Online payment fraud will increase next year, according to the largest percentage of online retailers in a survey conducted by CyberSource. 49% expect fraud to rise, while 44% expect it remain the same and 7% say it will decline.

 

Online payment fraud will increase next year, according to the largest percentage of online retailers in a survey conducted by CyberSource. 49% expect fraud to rise, while 44% expect it remain the same and 7% say it will decline, CyberSource Corp. reports in its 6th Annual Online Fraud Report.

78% of survey respondents attributed expected increases in online payment fraud to more sophisticated and effective fraudsters; 68% attributed it to a higher incidence of identify theft. The study was based on a survey of 348 online merchants between Sept. 17 and Oct. 1.

The study found that online payment fraud remained nearly the same year-over-year as a percentage of revenue, at 1.8%, but that it rose 36.8% in total value, to $2.6 billion from $1.9 billion, reflecting the overall rise in online spending.

The study also found that e-retailers rejected 5.9% orders due to suspicion of fraud, a rejection rate up 28% from a year ago. It also found, however, that merchants used an average of five fraud-prevention tools, up from three last year. Among the most popular new tools merchants reported using this year:
-- customer history files (used by 51% of study respondents);
-- negative files (45%);
-- geolocation tools (31%), which attempt to identify the geographic origin of an order based on the Internet address of the customer.

Other popular tools, with their rate of usage among respondents, 2004/2003:
-- address verification service, a tool that compares the numeric address data in an online order with the information on file with the credit card issuing bank, 82%/6%;
-- Card verification number, a code number separate from account numbers and placed on plastic cards by the issuing banks, 56%/44%; -- Internally built fraud screens, 53%/49%.

The study found that online merchants add one manual fraud reviewer for every $8 million in incremental online revenue. (For larger merchants who review a smaller percentage of orders, the average is about $16 million in incremental revenues per additional fraud reviewer.) Merchants in the survey review an average of 19 orders per hour.

 

 

comments powered by Disqus

Advertisement

Advertisement

Advertisement

From IR Blogs

FPO

Jim Erickson / E-Commerce

Why Western brands should register trademarks in China—now

China doesn’t recognize trademarks registered in other countries. Companies that register first in China get ...

FPO

Asher Elran / E-Commerce

E-commerce and duplicate content: solutions to common problems

Google penalizes retail web sites that display the same content on multiple pages, or that ...

Advertisement