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Online fraud biting ecommerce merchants

Posted by Michael Bloch in ecommerce (Thursday March 18, 2010 )

Merchants are continuing to lose a considerable amount of their overall revenue to online fraud according a recent survey.

The Merchant Risk Council (MRC), an organization focused on electronic commerce risk and payment strategies, recently announced the results of its Annual Merchant Fraud Survey.

This year’s survey shows an overall average of 1.2% of total revenue being lost to online fraud.

While merchants surveyed rejected 8% of international orders, the fraudulent international order rate was 2.0% for the overall sample.

The survey also revealed that merchants are using an average of 4.7 automated fraud screening detection tools. These tools can include common features such as Address Verification System (AVS) at the point of processing.

While fraud screening generally speaking, both automated tools and manual tactics, is improving – so too are the fraudster’s strategies. It’s a case of never being able to let your guard down.

The revenue loss figures likely don’t include time spent dealing with chargebacks either – which can come to a healthy chunk of change. Aside from the money lost, fraudulent transactions also endanger a merchant account. A high fraud rate can lead to higher processing fees and in extreme cases, see the merchant account being terminated. Once that happens, it’s a black mark against the merchant’s name, making it harder and more expensive to find a new merchant account arrangement.

If you’re not processing high levels of orders a day, manual or semi-automated tools can be just as effective as fully automated ones. Learn more about credit card fraud screening strategies.



 

 
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