According to a recent survey by CyberSource – a company specializing in electronic payments and risk management – online entrepreneurs are expected to lose at least $2.8 billion this year due to fraud in e-commerce, marking an 8% increase compared to last year.
The CyberSource survey revealed that online companies with annual revenues between $5 million and $25 million are facing the heaviest losses. For these companies, losses due to e-commerce fraud have reached 1.8% of total revenue, an increase of 0.3% from last year’s figure of 1.5%.
In contrast, online companies with annual revenues exceeding $25 million are experiencing less damage. This year, the losses from e-commerce fraud for these companies stand at just 1.2% of their total annual revenue, up 0.1% from 2004.
On the other hand, small online merchants are pleased to see a significant reduction in losses due to e-commerce fraud, with a decrease of 0.5% to 1.6%, compared to last year’s 2.1%.
According to CyberSource, the reason for this decline is that small retailers have increased the manual review of online orders to detect fraud without hiring additional staff, resulting in a noticeable reduction in losses. The survey indicates that merchants this year have manually reviewed up to a quarter of their orders, marking a 4% increase from 21% in 2004.
Most merchants today rely on two primary methods to combat e-commerce fraud: the first is using an address verification system, which compares the billing address on the payment invoice with the address registered by the cardholder with the bank. The second method involves verifying the card authentication code.
