Ecommerce Fraud Down 17.5 Percent in 2009
By Anna Johnson on November 23rd, 2009CyberSource Corporation’s 2009 survey of ecommerce fraud indicates that the total cost of fraud in North America has declined by 17.5 percent since 2008. While U.S. and Canadian merchants expect to lose around $3.3 billion to ecommerce fraud this year, this is substantially down from the $4 billion reported last year.
According to CyberSource, which has surveyed online merchants for 11 consecutive years, this is the first drop in estimated revenues lost since 2003. As a percentage of revenue, ecommerce merchants expect to lose 1.2 percent in 2009.
Doug Schwegman, CyberSource Director of Market and Customer Intelligence, says ecommerce merchants have reduced the incidence of online fraud due to a number of factors.
These include greater use of automated decision tools to sort orders (67 percent of merchants used these in 2009 vs. 56 percent the year before). For example, merchants earning more than $25 million in online sales per annum almost tripled their use of ‘device fingerprinting’.
Meanwhile, a third of survey respondents had changed their procedures to respond to fraudsters and 68 percent tracked the success of orders they had manually reviewed to get a better understanding of their fraud management and as a means of improving results, compared with 54 percent of merchants last year.
CyberSource warns, however, that significant challenges remain and that online merchants will need to remain vigilant. As around 20 percent of respondents indicated themselves, fraud schemes were increasingly complex. This year more fraudulent orders looked like legitimate orders compared with those in 2008.
Consumer electronics ecommerce merchants were hardest hit by online fraud in 2009. This segment had more than double the rejection rate (orders rejected due to the appearance of fraud) of the next highest group, rejecting 6.6 percent of orders received. Consumer electronics also reported the highest fraudulent order rate of any industry segment at 1.5 percent – 67 percent higher than average.
In general, many merchants believe automation will help them combat fraud, with 60 percent of merchants with ecommerce sales greater than $5 million planning to improve their automated detection and sorting capabilities, 20 percent looking to improve their process analytics capabilities, and 16 percent aiming to streamline the tasks and workflow around manual review.
