The Upward Trend in Fraud Cost Continues
The 2007 edition of the On Line Fraud Report, published by CyberSource has been released and I’ve digested it. There are no real surprises. The revenue lost to fraud continues to rise in spite of the efforts that the credit card industry has made to prevent fraud.
Losses for 2006 increased to USD 3.0 Billion, up from 2.8 Billion in 2005. The good news, if you can call it that, is that the percentage of lost revenue in 206 is down from 1.6% to 1.4%. You can bet that the credit card companies will quote the .2% decrease in the fraud rate and pat themselves on the back, but they won’t tell you that the amount lost to fraud increased by .2 Billion dollars. And you can bet that they also won’t remind you that the .2% decrease happened in spite of the wider acceptance of Payer Authentication, the program that was designed to reduce fraud by a significant amount.
After you’ve read the facts above, consider that over 80% of on line merchants are doing manual review of almost 25% of all orders, and merchants doing less than USD 5 Million are reviewing a full 40% of their orders. This is a significant increase over the 16% of orders reviewed in 2000. Manual review of orders is proven to be the best fraud prevention tool available, and yet a lot of merchants just don’t know how to do it properly. Most small merchants seem to think that an address verification and maybe a phone call to the cardholder will prevent fraud. It just isn’t that simple. Good manual review techniques are critical to your business. You need to do it right! The E-learning course, Prevent Chargebacks, will teach you the best practices available for manual screening. Don’t let some of that $3 Billion be part of your profit!
