E-tailers expecting fraud rates to triple during holiday season

[November 19th 2001]

Businesses selling online remain optimistic about online holiday sales for 2001, even in the wake of the September 11th attacks and a somewhat questionable economic climate, according to results of the third annual CyberSource Fraud Survey.

The survey, which was conducted in late September 2001, found that more than half of those surveyed (54 percent) expect their online sales volume to increase an average of 37 percent during the season, a 17 percent expected volume increase over last year.

While merchants expect sales volumes to increase significantly this holiday season, they are also expecting fraud rates to increase more than three times the average fraud rate merchants experience the rest of the year. With 54 percent of respondents viewing online credit card fraud as "very serious", concern has intensified and 65 percent are taking more precautions this year than last to prevent fraud during the 2001 holiday shopping season.

Merchants reported that online fraud significantly impacts their bottom-line profitability and that addressing fraud problems can result in significant operational inefficiencies. Fifty-seven percent rated revenue losses as the number one negative impact of fraud to their business, a 33 percent increase over last year. Fifty-three percent selected loss of staff time as the second highest impact of fraud.

In a related finding, while respondents indicated their highest concerns about managing fraud continue to be accurately detecting it and rejecting valid orders, their fastest growing concern is having enough resources to effectively combat it. Fifty percent of respondents rated this problem as one of their highest concerns, representing the most significant change - a 61 percent increase from last year's 31 percent.

"The results of this year's survey confirm what we have learned in the course of working with thousands of businesses selling online: many merchants have implemented complex business rules and manual review processes to address fraud. As a result, savings gained by stopping fraud are often lost due to inefficient methods of prevention," said Jeff King, Director of Product Management at CyberSource. "Because online fraud is a complex problem and changes quickly, merchants need to have a comprehensive, automated system in place that allows them to effectively detect and manage it, without sacrificing operational efficiency and profitability."

Links
CyberSource		http://www.cybersource.com