Adding to a growing list of why last year was such a good one for online retailers, a new report issued today says that fraud losses decreased in 2010, thanks in large part to merchants rejecting more suspect orders.
Though the overall fraud rate for online retailers from the U.S. and Canada held steady at 0.9 percent for the second consecutive year, the report from CyberSource reveals that total losses from fraud last year totaled $2.7 billion for U.S. retailers.
That’s a significant drop from the $3.3 billion reported in 2009.
“E-commerce sales are picking up but fraud managers are keeping up with increased fraud volume,” says Doug Schwegman, director of worldwide market intelligence at CyberSource, a Visa subsidiary that provides fraud prevention and payment processing services to web merchants.
According to CyberSource, the rate of fraud in the report is defined as the percentage of all accepted orders that eventually turn out to be fake. The company conducted the survey in September and October, polling 334 merchants in North America and another 200 from the United Kingdom.
Overall sales throughout 2010 were up across most e-commerce channels, but the report says a greater commitment on the part of web merchants to reject suspicious orders is the main reason for the decrease in total fraud. North American retailers rejected 2.7 percent of all 2010 orders, up slightly from 2.4 percent in 2009. It was the first increase in rejected orders in two full years but still far short of the 4 percent rejection rate that was reported in 2008.
U.K. retailers didn’t enjoy as strong of a year as their North American counterparts in this critical area—the overall fraud rate across the pond increased to 1.9 percent from 1.6 in 2009, though the U.K. rejection rate did actually increase to 5 percent, up 0.04 percent from the previous year.
CyberSource says the higher rate in the U.K. is due to criminals moving more activities to the country as a result of tougher prevention tactics elsewhere in the world, and also because many U.K. retailers are likely to accept cross-border transactions, many of which often turn out to be fraudulent.
Seems like it’s better to be in North America if you’re a merchant dealing with fraud right now, doesn’t it? As always, leave us your thoughts and comments.