May 23, 2008, 12:00 AM

Online purchase fraud will rise through 2010, then taper off, Javelin says

2.3 million consumers were victims of fraudulent online purchases with their credit and debit cards last year, says Javelin Strategy & Research. That number will peak at 2.7 million in 2010, then trend downward as online merchants strengthen security.

More consumers are being victimized by fraudulent use of their credit and debit cards to make online purchases, and such crimes will increase through 2010 before tapering off, according to research firm Javelin Strategy & Research.

2.3 million consumers were the victims last year of online purchase fraud and that number will increase to 2.7 million in 2010, then trend downward to 2.4 million in 2013, predicts Javelin analyst Rachel Kim in her recent “2008 Identify Fraud Forecast” report.

Online fraud will decline as more merchants follow the lead of large e-retailers like in beefing up their security systems, Kim says. One method she highlights is device recognition, which identifies when a consumer is coming from a computer that she’s not used before to access the e-commerce site, enabling the retailer to ask for additional proof of identity.

Kim also points to the Verified by Visa and MasterCard SecureCode security systems created by the card brands to better authenticate consumers in e-commerce transactions. She notes consumer adoption has been slow and encourages online retailers to offer incentives to customers who take part in these security programs.

Fraud does have an impact on consumers’ willingness to shop online, Javelin says. 30% of fraud victims say they have decreased their online shopping, while 8% have increased it and 62% say it’s remained the same, according to the Javelin report.

Javelin says online purchase fraud represented 28% of all U.S. identity fraud in 2007 and will steadily increase to 39% of such fraud by 2013 as stronger security measures put a crimp in offline card fraud and wireless telephone fraud. Total identity fraud will decline from $45 billion last year to $34 billion in 2013, Javelin predicts.

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