February 10, 2009, 12:00 AM

Afraid of fraud, 30% of U.S. e-retailers block orders from some countries

E-retailers are looking abroad for sales as the domestic economy sinks, but many are wary of the risk that such orders pose. 30% of merchants that accept international orders online have stopped taking orders from one or more countries because of fraud.

International e-commerce can be risky for U.S. and Canadian merchants, says a new report from payment processor CyberSource Corp. During 2008, 30% of merchants that accept international orders online and that CyberSource surveyed stopped taking orders from one or more countries because of high levels of fraud.

76% of merchants in that group shut off orders from Nigeria, 58% from Ghana, and 32% from Pakistan. Other countries blocked in 2008 included Indonesia, 23%, Singapore, 19%, Romania, 18%, China, Russia, and Vietnam with 13% each, and South Korea and Hong Kong with 10% each.

“Growth rates beyond U.S. and Canadian borders remain considerably higher than here, so during difficult economic times, expanding international e-commerce is a logical move for many merchants,” says Doug Schwegman, CyberSource director of market and customer intelligence. “But overall rates of fraud require merchants to exercise great care in handling orders received.”

According to the survey, 52% of e-merchants accept orders from abroad, accounting for 17% of their total sales. But merchants report that 4% of international orders turn out to be fraudulent-3.6 times the domestic rate of 1.1%. The international fraud rate has increased 67% since 2005. CyberSource reports.

In 2008, merchants rejected 11% of international orders compared to 2.9% of orders from the U.S. and Canada.

The survey data also showed leading centers for e-commerce fraud in the U.S. 25% of respondents said New York presented the highest risk of fraud among cities in the U.S. and Canada. Miami was second at 21% and Los Angeles third at 9%.

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