February 9, 2006, 12:00 AM

International online orders pose more fraud risk, survey says

A CyberSource survey finds that 55% of U.S. online merchants polled accept orders from outside the U.S. and Canada, representing about 14% of their total sales. The rate of direct fraud on such online orders at 2.4% doubles the overall fraud rate.

More than half of U.S.-based online merchants accepted orders from outside the U.S. and Canada in 2005 – 55%, according to merchants surveyed by CyberSource, which determined that for these e-retailers, international orders accounted for 14% of total sales. Yet the international orders were accepted at some peril: the rate of direct fraud on such orders averaged 2.4% or more than twice the overall fraud rate for online orders.

The data, from CyberSource`s Seventh Annual Online Fraud Report, highlight the need for balance between the growth opportunity represented by ex-U.S. sales and the greater risk of fraud that has been associated with such orders. CyberSouce notes that while the rate of growth in online sales in the U.S is about 20% a year, online sales in Europe and many other markets are growing at an even faster rate.

“Though international markets represent an attractive opportunity, online merchants must make sure that their fraud detection and management systems are robust enough to handle the additional risk involved,” according to CyberSource’s survey report. The report notes that online merchants who sell outside North America say they reject international orders due to the suspected fraud at a rate that is three times the overall average rate of 3.9%, representing approximately one out of every eight orders received.

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