Fraud Losses Pile Up for Online Retailers

Online fraud will account for more lost revenue than ever before in the decade-plus history of e-commerce. Online merchants expect to lose a record $4 billion to fraud in 2008, up from $3.7 billion last year, according to a recent survey from CyberSource, a provider of electronic payment and risk management solutions. The survey of 400 online retailers was conducted from Oct. 21 to Nov. 11. Here are some more findings of the survey:

the fraud loss rate will hold constant at 1.4 percent of online revenue, the same as the past two years;
2.9 percent of all online orders were rejected this year due to suspicion of fraud, down from 4.2 percent in 2007;
87 percent of respondents said they don't plan to add fraud support staff in 2009;
2 percent of all accepted consumer electronic purchases online this year were fraudulent, the highest percentage of a product category;
respondents said fraud on international orders was 3.6 times greater than domestic orders, accounting for 4 percent of all international orders; and
smaller and midsize online retailers ($5 million to $25 million in online revenues) were most challenged by fraud, reporting fraud revenue loss rates of 1.6 percent vs. 1.2 percent for companies with online revenues in excess of $25 million.