E-commerce Fraud Losses Drop

March 17, 2010

E-commerce fraud appears to be on the wane, according to [pdf] a new survey from payment management solutions provider CyberSource.

Online Fraud Dollars, Revenue Share Go Down
According to the “11th Annual Online Fraud Report,” projected 2009 fraud losses to U.S. and Canadian online retailers is $3.3 billion USD, a 17.5% decline from $4 billion USD worth of fraud losses reported in 2008. This is the first drop in estimated e-commerce fraud losses since 2003.

In addition, online retailers projected they would lose 1.2% of their online revenue to fraud this year, compared to a rate of 1.4% reported from 2006-2008. This is the lowest percentage revenue loss in the history of the survey.

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International Online Fraud Improves
Other signs of improvement e-commerce fraud include a 50% reduction in fraud rates on international orders, which dropped from 4% to 2% of order volume as well as a 30% reduction in rejection rates of international orders.

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Technology and Process Play Key Roles
Part of the reason for online retailers’ heightened success in reducing fraud may be an increased usage of fraud detection and prevention technology and processes. Sixty-seven percent of online retailers reported using automated decision tools to sort orders in 2009, compared to 56% in 2008. In addition, 60% of online retailers plan to improve automated fraud detection capabilities in 2010.

Manual order tracking is also on the rise, with 68% of online retailers manually tracking the success of online orders this year, compared to 54% last year. In general, 33% of online retailers changed their procedures to better respond to fraud in 2009.

About the Survey Decision makers who participated in this survey represent a blend of small, medium and large-sized organizations based in North America. Merchants participating in the survey reported a total estimate of more than $60 billion for their 2009 online sales. Survey respondents included both non-CyberSource and CyberSource merchants.

The survey was conducted via online questionnaire by Mindwave Research. Participating organizations completed the survey between September 10-October 7, 2009. All participants
were either responsible for or influenced decisions regarding risk management in their companies.

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