The upward trend of fraud continues
As I mentioned in my January 15 entry, the fraud statistics for 2007 are being released. The upward trend continues as e-Commerce continues to feel more pain than ever, in spite of the fraud prevention initiatives released by the industry.
The 9th Annual Online Fraud Report, published by CyberSource reports that while the percentage of revenue lost to fraud held at 1.4%, the online revenue dollar amount rose from $3.0 Billion to $3.6 Billion.
On the surface, this seems like good news; the fraud rate is holding steady at 1.4% and the increase in dollars is due to the increase in online spending - an increase of around 20%. In fact, if we look back at the numbers since 2000, there has been an overall decrease in the fraud rate - down from 3.6%.
So things are getting better, right? Consider that in this same period, the dollar amount lost to fraud has risen from $1.5 Billion to the current $3.6 Billion. It doesn’t look quite as rosy that way but, again, there’s been a steady increase in online spending to drive up the dollar amount as the percentage of revenue drops.
As the report points out, there’s more to this than those two numbers. There are all sorts of other factors involved in fraud prevention efforts. E-Commerce merchants are spending more and more on fraud screening. I’ll write more about some of these costs in later posts but, in general, online merchants are spending more and more of their revenue on fraud prevention. Automated and manual screening both eat away at the bottom line, with manual screening being the most effective yet most expensive in terms of people power.
The good news, as I see it, is that some of the better fraud fighting tools are becoming more utilized. IP Geolocation services, such as those offered by MaxMind and IP2Location do a great job of fraud prevention at the automated and manual screening levels. Customer device “fingerprinting” is one of the emerging tools that should go a long way to help online merchants.
