Online Fraud – a Growing Threat to eCommerce Industry

Online fraud is becoming a major threat for the growing eCommerce industry, not only in US but also globally. As eCommerce is growing, managing online sales is becoming a big challenge for online retailers. According to Cyber Source Corporation’s report, the percent of revenue loss because of online fraud is decreasing, but the actual total value of dollar loss resulting from online payment is increasing by 20% a year. The survey is conducted on US and Canada online markets.

  • The revenue lost due to online fraud decreased from 3.6% in 2004 to 1.4% in 2007, but the total value of dollars lost due to online payment is increased by 20% a year. That means the loss has grown from $1.5 billion in 2004 to $3.6 billion in 2007.
  • Chargebacks forms the major part of the online fraud. Usually, a chargeback occurs when a buyer asks their credit card company to remove a charge from their credit card statement. The average percent of total chargebacks account for 47% in the entire online fraud in 2007 down from 53% in 2006. But the rate is high when compared to 43% in 2005. The value of chargebacks account for $1.7 billion in 2007.
  • Another threat to the eCommerce is the rejection of valid orders by online retailers. This is done because of the fear of fraudulent orders. The overall order rejection rate has been increasing over the past 3 years, from 3.9% in 2005 to 4.1% in 2006 and 4.2% in 2007.
  • It is also found that the percentage of orders accepted by online merchants but later determined to be fraudulent is growing. It is 1.3% in 2007 compared to 1.1% in 2006.
  • The number of order rejections is increasing corresponding to the people using eCommerce globally. Online merchants are reporting that international order rejecting rate for 2007 is 11%, that means two and half times higher than domestic rejection rate, which is 4.2% that includes the online markets of US and Canada.

Online retailers are facing revenue losses in different ways due to online fraud. In order to cut down fraud significantly and to reduce its impact on eCommerce industry, end-to-end technology solutions, awareness among the online retailers and the online buyers are required.

Posted In Blog

Leave a Reply

  • Required
  • Required