North American merchants hit back at e-commerce fraud

North American merchants hit back at e-commerce fraud

North American merchants appear to be fighting back in the battle against e-commerce fraud, with losses in 2009 down 18% on the previous year, to $3.3 billion, according to tech security outfit CyberSource.

The fall, from $4 billion in 2008, is the first year-on-year reduction in revenue losses for US and Canadian merchants since 2003.

CyberSource, which polled 352 merchants, says the percentage of revenue respondents predict they will lose in 2009, on average, is 1.2%, the lowest estimate in the 11 years the firm has conducted the survey.

Doug Schwegman, director, market and customer intelligence, CyberSource, says: "The e-commerce fraud picture has typically been one of worsening merchant losses. This year, merchants have won back some ground. In an economy where many predicted fraud challenges would increase, e-commerce merchants in the US and Canada fared better than they have in the past against fraudulent online payment."

The vendor claims a significant factor in the fight-back is greater use of automated decision tools to sort orders - tapped by 67% of those polled, compared to 56% the year before. Around a third of respondents have changed their procedures to respond to fraudsters and 68% now track the success of orders they have manually reviewed. Last year, only 54% of merchants tracked those successes and failures.

There is also encouraging signs for e-commerce merchants selling overseas. Over half of firms now accept orders originating from outside the US and Canada, with orders comprising 21% of total volume. Fraud rates on international orders dropped 50% this year and order rejection rates 30%. However, fraud rates are still double those of domestic orders.

Despite the overall fall, with losses of over $3 billion, merchants still face significant challenges. A fifth of those polled say fraud schemes were increasingly complex this year, and almost half say fraudulent orders appeared "cleaner" than in 2008.

With this in mind, 60% of merchants with e-commerce sales greater than $5 million say their top priority for next year is improving the automated detection and sorting capabilities of their systems. A fifth are looking to improve their process analytics capabilities, and 16% are focused on streamlining the tasks and workflow around manual review.

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