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BizReport : Ecommerce archives : November 17, 2006

Online Fraudsters Rob U.S. E-commerce of $3 Billion in 2006

Cybersource's new survey shows a 7% increase in fraudulent transactions compared to 2005.

by Helen Leggatt

Whilst the percentage of e-commerce revenue from internet fraud has dropped for the third year in a row, down marginally from 1.6% in 2005 to the current figure of 1.4%, the year on year rise in e-commerce revenue means losses continue to mount.

The rise in online sales means more and more transactions need to be scrutinized for fraud, yet in 2005 online merchants manually reviewed just 23%, a drop of 3% from last year. Instead they are turning to fraud management tools with a 30% rise in detection automation over 2005.

value of a fraudulent order

Online retailers say, 1.1% of all orders accepted turn out to be fraudulent, and this has been the trend over the 3 years (1% in 2005, 1.3% in 2004), but many more orders (4%) are rejected on suspicion of fraud. This rejection figure trebles to 12.7% for international transactions (outside U.S. and Canada).

orders accepted that turn out to be fraudulent

"eCommerce merchants are throwing every available weapon at fraud," said Doug Schwegman, CyberSource director of customer and market intelligence. "The increase in use of anti-fraud tools and of case management systems is paralleled by lower review rates and a 50% jump in reviewer efficiency. The continuing growth of eCommerce orders means we need to see continued increases in merchant fraud management efficiencies to keep profits rising."

The full report can be downloaded from CyberSource’s website.

Tags: e-commerce, fraud, online sales

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