US e-tailers to lose $4bn to fraud in 2008 - CyberSource

US e-tailers to lose $4bn to fraud in 2008 - CyberSource

US e-commerce merchants expect online fraud to cost them a record $4 billion this year, up from $3.7 billion in 2007, according to a survey from electronic payments outfit CyberSource.

However, the poll of 400 e-tailers found that although losses are rising in dollar terms, they are holding steady as a percentage of revenue. In 2008, respondents expect the fraud loss rate to be 1.4% of revenue, the same as 2007 and 2006.

In 2008, e-tailers rejected 2.9% of orders because of concerns about fraud, compared to 4.2% the previous year. CyberSource says falling rejection rates coupled with steady fraud levels imply merchants are more successful this year at fighting fraud.

The survey also shows international orders are far riskier than those from people in the US and Canada. The fraud rate on orders accepted by merchants averages 1.1% for US and Canadian customers but the figure is 3.6 times higher on international orders.

When it comes to fighting fraud, CyberSource says respondents are showing evidence of increasing interest in automated detection tools. The firm asked merchants about their plans to implement 14 tools that had also been studied in 2007. In every case the intent to implement increased, in some cases by as much as two to three times.

Doug Schwegman, director, market and customer intelligence, CyberSource, says: "Losing on average about 1.4 percent of sales to fraud has been the constant. This year, however, for the first time, merchants could not rely on double-digit market expansion to bolster online revenue growth or to cover inefficiencies. In two key areas - lower order rejection rate and higher interest in automated tools - merchants seem to be managing more aggressively in a challenging economy."

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