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Online fraud report

UK online merchants are bucking the downward business trend and expecting continued growth in 2012 according to an eighth annual UK Online Fraud Report by CyberSource.

Digital goods businesses are growing particularly strongly; those anticipating growth in 2012 are forecasting an average 33 per cent increase in online revenues. CyberSource, a wholly-owned subsidiary of Visa Inc., is a payment management company.

In all, 73pc of merchants expect online revenue growth in 2012 while 24pc  forecast no change. Amongst those expecting to grow, smaller businesses (annual online revenue less than £500,000) are the most optimistic, with ambitious plans for 35pc  growth on average. The largest businesses (those greater than £25m annual online revenue) are more conservative, forecasting an increase of 18pc .

“The mobile channel presents a real opportunity for merchants,” said Dr Akif Khan, co-author of the report and Director, Products and Services, CyberSource EMEA. He said that 38pc  of merchants now have a dedicated mobile website and 26pc  have their own app. “But just a quarter of those merchants are tracking fraud originating on their mobile site and only 16pc  are tracking fraud through their mobile apps. With interfaces often streamlined to make mobile commerce simpler for the user, the fraud risks on mobile channels are different and still need to be properly understood. If fraud costs are to be managed efficiently across multiple channels in 2012, each should be measured and configured individually.”

By sector

The impact of fraud varies by sector, showing the diversity of UK online merchants. For the travel and services sectors, the biggest concern is sheer revenue loss. Half (51pc)  of travel and 46pc  of services vendors selected revenue loss as the greatest fraud concern. For physical goods retailers the challenge is different: half (50pc)  say their greatest concern is inadvertently turning away good orders. For digital goods businesses the main challenge is the cost of manually reviewing too many orders (41pc).

Manual review

Since the 2009 survey, the percentage of merchants using manual review has fallen by 10pc , with 61pc  of merchants reporting that they engaged in manual review in 2011. The practice remains most common in small businesses where one fifth of respondents review almost every order. Very large merchants are the most efficient users of manual review, examining only 11pc  of orders on average.

Manual order review rates are fairly consistent across business sectors with each just a few percent either side of the average rate of 22pc . However, manual review remains inefficient: merchants ultimately accept 75pc  of the orders that they review. These results suggest merchants should devote increased attention to improving their automated order screening procedures to increase detection accuracy and lower the need for manual review.

The report was released on Tuesday 24 January 2012. To receive a copy of the report visit:
www.cybersource.co.uk/ukfraudreport.

The eighth annual UK Online Fraud Report survey was conducted by technology market research specialists Vanson Bourne and was commissioned by CyberSource Ltd. The survey was fielded from 5 to 30 September 2011 and yielded 200 qualified responses. The sample was drawn from a database of companies involved in eCommerce activities, including both CyberSource and non-CyberSource merchants. Incentives to respondents included entry into a prize draw for an iPad.


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