Merchant Risk Council survey numbers provide e-commerce risk update

March 3, 2009
Survey indicates council's largest members better prepared for online fraud than most

The Merchant Risk Council, a trade association of merchants using e-commerce and dealing with global payment issues, provided an update this week, and the update shows that many of their members are doing things right -- or at least beating national averages.

The organization surveyed MRC Platinum members -- 150 of the largest e-commerce retailers -- regarding online fraud issues. What it found was that MRC Platinum retailers were outpacing other retailers in terms of online sales protection. Notable was that the group reported only 1.1 percent of their total revenue lost to online fraud. According to the survey, the average online merchant surveyed lost 1.4 percent to online fraud. Compared to other non-member merchants who were also large businesses that compared to the size of MRC Platinum members, the MRC members were still favored. The large non-member merchants reported 1.3 percent of their total revenues lost to online fraud.

Losses related to online fraud weren't the only area where MRC Platinum members held advantage over the general merchant population. One of the problems faced by online retailers is when to reject a sale because it is believed to be fraudulent. The key, for merchants, is to reject the orders which truly are fraudulent without casting too wide a net and losing non-fraudulent sales. In that area, the MRC Platinum members rejected only 2.4 percent of domestic orders based on a suspicion of fraud; the overall sample rejected 2.9 percent, and larger non-member merchants rejected 2.6 percent.

The advantage was to MRC Platinum members also in terms or rejecting international orders. Some 6 percent of online orders were rejected by the MRC Platinum member companies. The overall sample rejected 11 percent, and the large non-member merchants sample rejected 12 percent of online orders. Fraudulent international order rates were 3.2 percent for MRC Platinum members, compared to 4 percent for the overall group, and 3.4 percent for larger non-member merchants.

So what are the MRC Platinum members doing differently? One thing may be the addition of automated fraud screening detection tools. The MRC survey found that the average MRC Platinum member uses 7.8 automated fraud screening detection tools. Overall, the survey sample found merchants to use 4.7 tools and 5 tools by large non-member merchants.

“This survey shows that even though MRC members are allowing a much greater rate of online orders to be processed, they are actually experiencing a lower rate of overall fraud for both domestic and overseas orders,” said MRC Chairman Tom Sullivan, who also serves as the senior director of global payments and risk for Expedia. “As merchants continue to look for ways to maximize revenues during tough economic times, accepting more valid international orders can be a great source of growth.”

The council is holding its 7th Annual e-Commerce Payments and Risk Conference next week, from March 10–12 at the Wynn casino/hotel in Las Vegas. The conference brings together top online merchants, credit card companies, law enforcement, risk management companies and others involved in the industry of protecting online payments and e-commerce.

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