Online retailers losing 1.4 percent of revenues to fraud

A new study from Mindwave Research and sponsored by CyberSource Corporation, the 9th Annual CyberSource Fraud Survey, points to a big challenge with online ecommerce: 1.4 percent of total online retail revenues are lost on average to fraud.

Fortunately, says the Merchant Risk Council, an association promoting secure e-commerce, the use of anti-fraud tools can significantly reduce online retail fraud. The group has a core membership a group of the largest Internet retailers; the members share best practices in risk management and fraud prevention, and the group says that sharing best practices and employing the latest tools can make financial sense.

To back up that claim, the MRC points to the survey numbers, which shows that MRC members are reporting only an average of .8 percent of total revenue lost to online fraud, versus the 1.4 percent online retail industry average. What's more, by employing online retail best practices and anti-fraud tools, retailers can lower their rate of fraudulent orders. The MRC's Platinum Merchants (120 of the biggest dot-com retailers) reported that their fraudulent order rate was .56 percent of accepted orders, compared to .67 percent for larger online merchants, and a 1.3 percent average for the entire response group.

More complete survey results were presented this week at the Merchant Risk Council's 6th Annual Conference in Las Vegas, Nevada.