$2.8 bln in e-commerce revenues lost to fraud in 2005

Dollar losses from e-commerce fraud continue to mount. Fraudsters will steal more than $2.8 bln from e-commerce in 2005, an 8% increase over 2004. Although the overall rate of fraud loss remains relatively constant at 1.6% of revenue, mid-to-large merchants are taking a pounding. Merchants selling $5-$25 mln annually online saw fraud losses increase from 1.5% to 1.8% of revenue. Those selling over $25 mln saw losses increase from 1.1% to 1.2% of revenue. International e-commerce continues to be a far higher risk, with order rejection and fraud rates about three times higher than the overall rate, CyberSource reports.

Overall, smaller merchants, those with annual e-commerce revenues below $5 mln, fared better in 2005, with lower fraud loss rates compared to 2004. All merchants are reviewing more orders manually. This increase is largely due to the growth of e-commerce, though over 75% say they are unable to add staff. Highest review rates remain in small business, where more than one of out four orders are manually examined. Mid-to-large merchants are forced to seek productivity gains, employing twice as many screening and automated decisioning tools as small businesses. Chargeback rates may understate actual fraud rates by as much as 50%.