Online retailers getting a better handle on credit card fraud, study says
Internet retailers are experiencing a sharp drop in chargebacks of credit card transactions, with 9.7% experiencing a chargeback rate of more than 1%, down from 18% of merchants a year earlier, according to results of a June 2003 study released today by the Merchants Risk Council. One reason for the decline: merchants are spending more on anti-fraud measures. 17% of merchants spent more than 2% of revenue to fight fraud in 2003, up from 13% of merchants a year earlier.
The Council, which surveyed more than 200 online merchants, said 64% of respondents reported a chargeback rate of less than 0.35%, compared to 48% who reported less than 0.35% in 2002.
It also noted a rise in the percentage of online retailers who have implemented the Verified by Visa or MasterCard SecureCode anti-fraud programs, which require card holders to identify themselves with a personal identification number at the time of online purchase. It said 45% had implemented or planned to implement at least one of the programs in 2003, up from 31% in 2002. But it noted that 16% of merchants had still never heard of Verified by Visa.
In another anti-fraud matter, the West Virginia state legislature is considering a bill (S. 34) that encourages credit card issuers to get involved in investigating and prosecuting online credit card fraud cases. Issuers that don’t participate would be limited to recouping from merchants a maximum of $250 for each incident of fraud, but would face no limit if they do participate.
MasterCard and Visa were unable to comment at presstime. Gary Howell, operator of West Virginia-based HowellAutomotive.com, who supports the bill, says it would have saved him more than $9,000 in three cases of fraud that card companies refused to prosecute.
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