April 1, 2012, 12:00 AM

The Internet Retailer Survey: Lower debit card rates elude most online retailers, but it's still early

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Most retailers say they have fraud under control, with 71.7% reporting a fraud rate of less than 1.0%, 12.3% a fraud rate of between 1.0% and 2.0%, 8.7% between 2.0% and 3.0%, 5.8% between 3.0 and 5.0%, and 1.4% more than 5%. Fraud rates were unchanged in the past year for 62.5% of respondents, while rising for 21.8% and falling for 15.7%.

One way e-retailers block fraud is by manually reviewing suspicious transactions. This step may thwart a criminal or it could allow a legitimate transaction to proceed that automated systems might have halted. In the survey, 41.3% of e-retailers say they perform manual reviews on 5.0% or less of their transactions. 11.6% say they do so on between 6.0% and 10.0% of their transactions; 5.1% review between 11.0% and 15.0%; 2.2% between 16.0% and 20.0%; and 39.9% on more than 20.0% of their transactions.

For many e-retailers, the manual review process usually results in a sale. 83.1% say they reject fewer than 10.0% of transactions put through this step. 6.6% reject between 11.0% and 20.0%; 3.7% between 21.0% and 30.0%; 2.9% between 31.0% and 40.0%; and 3.6% more than 40.0%.

With few signs that online fraud is on the rise, online retailers may want to focus their attention on renegotiating processing contracts to benefit from the lower debit card rates the Fed has mandated.

kevin@verticalwebmedia.com

@KevinWoodwardIR

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