Study Says Online Merchants Made Significant Progress Fighting Fraud in 2011

However, the CyberSource study also shows that fraudsters are making off with more per theft than in previous years.

Online merchants made significant progress fighting fraud in 2011, according to CyberSource, a payment management company. CyberSource, a Visa subsidiary, today announced results of its 13th annual survey of e-commerce fraud.

According to the survey, the percentage of online orders that turned out to be fraudulent dropped from .9 percent in 2010 to .6 percent in 2011 -- the lowest in the 13-year history of the survey.

However, the cost of combatting fraud continues to grow, according to CyberSource. Dollar losses were up, manual review continued to climb, and merchants reiterated their concern that fraud is becoming more difficult to detect. Twenty-seven percent of respondents said they are engaged in mobile commerce, and initial indicators regarding combatting fraud in that channel are promising.

On average, merchants say 1 percent of online revenues were lost to fraud in 2011, a slight increase over last year's figure of .9 percent, according to the survey. That translates to an estimated 2011 merchant dollar loss of approximately $3.4 billion. This is the first time merchants have cited an increase in the fraud rate by revenue since 2004, said CyberSource. The decease in the amount of online fraud, accompanied by higher estimated revenue loss, means fraudsters are stealing more expensive items -- $250 on average as opposed to $150 on average for a valid order.

"The continued growth in e-commerce is a welcome development for merchants and the economy overall," said Andrew Naumann, CyberSource senior business leader, fraud management solutions, in a statement. "The bad news is that fraudsters took in a higher dollar volume, the first such increase we've seen since 2008. Our study shows merchants are working harder than ever to keep fraud in check, using more tools and reviewing more orders. Clearly the criminal element is growing more sophisticated."

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio