CyberSource, a Visa company today announced results of its 13th annual survey of eCommerce fraud. The overall picture: merchants are making gains against fraud but the battle continues.
Fraud rate Dropped
The fraud rate by order (the percentage of orders that turned out to be fraudulent) dropped from 0.9 percent in 2010 to 0.6 percent in 2011–the lowest in the 13 year history of the survey. But the cost of combatting fraud continues to grow. Dollar losses were up, manual review continued to climb, and merchants reiterated their concern that fraud is becoming more difficult to detect. 27 percent of respondents said they are engaged in mobile commerce and initial indicators regarding fraud in that channel are promising.
“The criminal element is growing more sophisticated”
“The continued growth in eCommerce is a welcome development for merchants and the economy overall,” said Andrew Naumann, CyberSource Senior Business Leader, Fraud Management Solutions. “The bad news is that fraudsters took in a higher dollar volume, the first such increase we’ve seen since 2008. Our study shows merchants are working harder than ever to keep fraud in check, using more tools and reviewing more orders. Clearly the criminal element is growing more sophisticated.”
Equal or lower perceived risk from mobile commerce
27 percent of merchants responding to the survey indicate they have made investments in true mCommerce channels (accept orders from a mobile app or mobile optimized browser). Among those tracking fraud rates in this comparatively new channel, the majority (92 percent) feel fraud is equal to or lower than that experienced with online orders.
International orders carry higher risk
Nearly 60 percent of merchants surveyed accept orders from outside of the U.S. and Canada, showing growing ease with the international marketplace. However, merchants are still taking a cautious approach, rejecting 7.3 percent of international orders (vs. 2.8 percent of orders originating in North America) — over 2.5 times higher. This prudence is warranted — the international fraud rate by order was 2.0 percent, over 3 times higher than the fraud rate by order for North American orders (0.6 percent). One quarter of respondents said their company had stopped accepting international orders altogether due to the fraud risk–50 percent of that group specifically citing Nigeria as a high risk area. Merchants looking to grow their international sales channel may need to employ additional tools to detect sophisticated fraud, such as global transaction activity modeling, website behavior analysis, device fingerprinting, and IP geolocation.