March 12, 2010, 12:00 AM

Fraud is costing online merchants 1.2% of revenue, survey finds

Online merchants are seeing fraud losses that average 1.2% of their revenue, suggest survey findings from the Merchant Risk Council, a trade group that focuses on e-commerce risk and payments.

Online merchants are seeing fraud losses that average 1.2% of their revenue, suggest survey findings from the Merchant Risk Council, a trade group that focuses on e-commerce risk and payments.

The group based the finding on surveys conducted between Sept. 10 and Oct. 7 of about 350 online merchants. CyberSource Corp. sponsored the survey.

Fraud losses for larger online merchants were smaller than the average retailer, the council says. The council’s platinum members, who pay $1,000 a year in membership dues and receive discounts and perks, reported fraud losses of 0.9% of revenue. The council’s platinum members include at least 200 of the largest online merchants in the world, each of which take in at least $75 million in annual revenue. Survey findings included responses from 81 platinum members.

The council says platinum members who responded to the survey rejected 6% of international orders, compared with 8% for all survey respondents. Fraud rates for international orders stand at 1.4% for platinum members, compared with 2% for all survey respondents.

The council’s platinum members use an average of 7.9 automated fraud screening tools, according to survey findings, compared with 4.7 tools for all survey respondents.

“The fewer tools that are used on the manual and automatic side, the higher the fraud rates are,” a council spokesman says. “Also, collaboration is proving to work. We see that when retailers work with other retailers, the best practices they learn from each other are invaluable.”

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