Online fraud remains a rising problem, as a quarter of merchants fail to check orders

News by Dan Raywood

UK merchants have said that online fraud is the greatest threat to their business, with an average of 1.8 per cent of online revenue lost to payment fraud in 2009.

UK merchants have said that online fraud is the greatest threat to their business, with an average of 1.8 per cent of online revenue lost to payment fraud in 2009.

According to the sixth annual UK online fraud report by CyberSource, on average 1.6 per cent of orders accepted proved to be fraudulent. It also found that over 70 per cent of merchants surveyed manually check orders as part of their fraud management process, while five per cent manually review every order. Twenty-five per cent are not reviewing at all and are just doing a straight accept or reject.

Of those checked, 69 per cent of manually checked orders are ultimately accepted, with one-third of merchants accepting more than 91 per cent of reviewed orders. 

Dr. Akif Khan, co-author of the fraud report and head of client and technical services at CyberSource, said: “Online fraud represents a significant revenue loss for merchants. It is not just the cost of fraudulent orders that needs to be considered, but also the additional costs of rejecting valid orders, administration of fraud claims and paying for the maintenance of internal systems.

Commenting on the review process, Khan said that merchants should look for things that are suspicious.

Khan said: “There is an element of being afraid to shop online, 46 per cent said that positive stories in the media encouraged them, but two-thirds say that they get more information in the negative stories. This is bad news for retailers as five per cent said that it is the responsibility of the police.”

Commenting, Charlie McMurdie, detective superintendent of the Police Central e-Crime Unit (PCeU), said: “Our role is around raising public awareness and on the preventative side, but when it all goes wrong we will step in. Law enforcement is more with the users, and it is a case of UK industry working with industry in partnership with us, developing intelligence with us, doing analysis and when a member of the public reports it.

“If 2,000 reports come in they may not get joined up, if you get it joined up it is much quicker. There is work underway, it is still in the early stages with the national reporting centre but if someone reports 2,000 stolen identities we need to know.”

“These figures haven't changed significantly over the last year and it's a cause for concern that so many manually reviewed orders are actually accepted. Manual review represents a critical area of profit leakage,” said Khan.

“If not managed effectively it can be expensive, limit scalability and impact customer satisfaction. Merchants should focus on improving the accuracy of their initial automated screening so that only truly suspicious orders are subject to this additional layer of authentication.”


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