Online fraud continues to rise despite countermeasures

Despite ongoing investment in tackling fraud, online merchants continue to see their losses from fraud increase, according to a survey of 150 online retailers conducted by Cybersource Ltd.

The overall rate of fraud increased 2.6%, which does not sound like much, however, Cybersource says for approximately 13% of merchants, the rate of fraud increased by more than 20% and 37% of merchants experience losses due to fraud of 1% or more. These increases are in spite of the fact that in the UK at least, approximately 60% of merchants now deploy Verified by Visa and MasterCard SecureCard schemes, which require the purchaser to type in a private code known only to them and their bank.

But it is perhaps the indirect costs of fraud that are more telling. According to the survey, 20% of merchants reject more than 5% of orders because they suspect fraud, although some of these orders may be authentic.

Despite the increasing sophistication of automated fraud screening software, Cybersource's survey indicates that 10% of merchants still reviewed every order manually, which is deemed costly and inefficient. It begs the question, do merchants see automated fraud screening as too costly or difficult to implement?