Fraud fears force US web firms to axe international sales

 

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Posted on 15 Dec 2008 at 15:29

Almost half of US web retailers will not trade beyond their national boarders and new research suggests that this reluctance is due at least in part to the fact that fraud on international orders is almost four times higher than on domestic sales.

The tenth annual CyberSource Corporation survey of eCommerce fraud reports that, since 2006, fraud on international orders has grown from 2.7 per cent to current levels of almost 4 per cent. However, although these figures may be bad news for US web business, there should be no problem for tech-hungry Brits to snap up an online bargain from the other side of the Atlantic. Some 52 per cent of US merchants that responded to the CyberSource poll, said they accept orders from beyond the borders of the US and Canada.

And those merchants say international orders constitute an average of 17 per cent of their total orders in 2008. According to the report US merchants expect to lose a record $4bn to online fraud in 2008. The ecommerce firms expect this fraud loss rate will hold constant at 1.4 per cent of revenue - the same figure it has been for the last two years.

"For years, U.S. eCommerce merchants have fought fraudsters to what amounts to an annual standoff," said Doug Schwegman, CyberSource director of market and customer intelligence. "Losing on average about 1.4 per cent of sales to fraud has been the constant. This year, however, for the first time, merchants could not rely on double-digit market expansion to bolster online revenue growth or to cover inefficiencies. In two key areas -- lower order rejection rate and higher interest in automated tools -- merchants seem to be managing more aggressively in a challenging economy."

Order rejection rates due to suspicion of fraud, which have been consistent for several years at around 4 per cent of incoming orders, showed a significant drop in 2008, falling from last year's 4.2 per cent to 2.9 per cent. This indicates that merchants are accepting a higher percentage of the orders they receive.

Over the past five years, the survey has shown that merchants that manually review orders for fraud examine an average of one out of every three orders they receive. So there continues to be heavy human involvement in what one might expect to be an automated process.

Author: Robert Jaques