December 29, 2008, 12:00 AM

E-payment fraud projected to hit $4 billion in 2008, up 11% over 2007

E-commerce fraud losses in the U.S. and Canada are expected to reach $4 billion in 2008, an 11% increase from $3.6 billion in 2007, according to CyberSource Corp.’s 10th annual survey of e-commerce fraud.

Internet Retailer

E-commerce fraud losses in the U.S. and Canada are expected to reach $4 billion in 2008, an 11% increase from $3.6 billion in 2007, according to CyberSource Corp.’s 10th annual survey of e-commerce fraud.

Chargebacks accounted for almost half of 2008 online payment fraud losses. The percentage of online revenue lost to fraud held steady from 2007 at 1.4% of online sales, the report says.

Merchants fight only about 50% of the fraud chargebacks they receive, with a third of merchants challenging less than 10%. Merchants that do challenge chargebacks recover, on average, 28% of that revenue, CyberSource says.

The consumer electronics category showed the highest 2008 fraud rate at 2%, nearly double the average among the eight industry segments measured. Merchants with online revenue of $5 million to $25 million faced the most fraud.

The annual survey also found that order-rejection rates tied to suspicion of fraud showed a significant drop to 2.9% of incoming orders, down from 4.2% in 2007. On average, 1.1% of accepted orders were fraudulent, CyberSource says. Merchants have made little progress in minimizing the time spent manually examining good orders, CyberSource says.

Merchants in 2008 accepted an average of 73% of orders they manually reviewed, roughly the same percentage as in 2007. About half of merchants accepted 90% or more of the orders they reviewed.

CyberSource surveyed 400 online merchants in the U.S. and Canada between Oct. 21 and Nov. 11.

billb@verticalwebmedia.com

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