Online revenues lost to payment fraud have remained relatively stable at 1.4%, but the dollar losses continue to mount as the industry grows. A recently released report estimates that $4 billion in online revenues were lost to payment fraud during 2008, compared to about $2 billion five years prior. CyberSource’s “10th Annual Online Fraud Report” also found that merchants continue to report that chargebacks accounted for less than half of fraud losses. The remainder occurred when merchants issued credit to reverse a charge in response to a consumers claim of fraudulent account use. CyberSource says that merchants reported an overall average fraudulent order rate of 1.1% in the U.S. and Canada last year. Over the past six years the average percent of accepted orders which turn out to be fraudulent has varied from 1.0% to 1.3%. Among industry sectors, Consumer Electronics reported the highest fraudulent order rate, averaging 2%. In 2008 fraud rates on international orders continued to climb, reaching an average of 4.0%, up from 2.4% in 2005. Merchants also reject international orders at a rate three-and-one-half times higher than domestic orders. However, over the past six years the overall percent of online orders that enter manual fraud review has fluctuated between 22% and 27%. Over the past three years large merchants ($25M+ in online sales) performing manual order review have, on average, reviewed approximately 15% of orders.
ONLINE FRAUD 2000: $1.5 billion 2001: $1.7 billion 2002: $2.1 billion 2003: $1.9 billion 2004: $2.6 billion 2005: $2.8 billion 2006: $3.0 billion 2007: $3.6 billion 2008: $4.0 billion Source: CyberSource