Online sales doing great? Good for you—and bad for you. The more Internet commerce grows, the greater the chances of cyber scams, warns a report from CyberSource Corporation. The company’s sixth annual survey of online fraud, conducted by Mindwave Research on a sample of 348 e-commerce firms, found the following:
* U.S. merchants predict 39% growth in Internet sales this year, but may lose $2.6 billion to online fraud, $700 million more than in 2003. This tops the fraud loss record of $2.1 billion set in 2002.
* If yours is a small to medium-sized business, watch out! Companies with online revenue of $500,000 to $5 million expect to lose up to 2.5% of their sales to fraud. Bigger firms anticipate losses of 1.1% to 1.5%.
* Scammers tend to go for high-ticket items. Tricksters who order merchandise “pay” a median price of $150; legitimate shoppers pay $100.
* You may be thrilled to see all those orders coming from abroad, but alas, they’re likely to be fraudulent. The survey reports that international orders are rejected twice as often as orders from North America. Merchants who accept orders from outside the U.S. and Canada say they reject over 13% of them just on suspicion of fraud. And among the orders accepted, 3.8% turn out to be fraudulent, a rate nearly three times higher than the overall rate.
With so much working against you, is there anything you can do to protect yourself? CyberSource offers these recommendations:
Increase the size of your manual review staff. There’s been a 20% increase from last year in the number of orders examined manually. Twenty-seven percent of all orders receive manual checks today. Yet, only 21% of merchants expect to hire more review personnel next year—a shortfall that could cost them dearly.
Use a variety of commercial fraud screening solutions. The number of retailers using these is 55% higher than it was in 2003. In this case, more is better: The average retailer uses at least five screening tools, and 40% of merchants use six or more. If you have the resources, invest in automation. Seventy-nine percent of companies with $25 million or more in revenue have automated order screening systems.
For more information, visit http://www.cybersource.com/fraudreport/