Online retailers successfully fighting fraud - report

 

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By Matt Whipp

Posted on 7 Dec 2006 at 15:36

With growing numbers turning to the Internet for their shopping, online retailers are successfully containing fraud, and more than half report no change or a drop in losses related to fraud.

According to a report which interviewed 150 retailers across the UK, only 27 per cent have seen fraud losses rise as a proportion of revenue.

Part of the success is an increased investment in antifraud measures, with some doubling funding, and nearly half increasing their spend by 10 per cent. On average, they spend £125,000 on fraud prevention, although larger companies spend significantly more.

Removing enterprise class firms from the equation, the survey showed companies' spend ranged from £10,000 to £100,000.

They are also employing layered defences, with an average of six systems in place. Consumer electronics retailers and telcos are at the top end, averaging eight different defences. Food and entertainment retailers used fewer than five.

Despite the layered approach, nearly two-thirds, 65 per cent, still rely on manual checking to identify attempts at fraudulent transactions. It is the third most popular approach, and is also one of the most expensive.

Additionally, retailers found that antifraud tools Card Verification Number and automated systems such as CyberSource's Decision Manager as the most effective, used by 46 per cent of respondents.

Nathan Jackson, managing director of CyberSource said: 'This year's report is further evidence that online retailers are not a soft target as they have sometimes been portrayed. By deploying a range of tools to create defence in depth, and adding new tools as they become available, retailers are making the online shopping environment increasingly secure.'

Online fraud is likely to further decrease in the future, as merchants come into line with the Payment Card Industry (PCI) Data Security Standard. This security certification is the most common component added by UK online retailers to their defence portfolio over the past year.

There remain however some 36 per cent that have only started the process, while 40 per cent say they have no plans to implement systems in order to gain certification. Even so, they will have a greater motivation to adopt the standard once MasterCard introduces fines for non-compliance in July next year.

Retailers expect the fraudsters to respond in kind: their biggest fear is increasingly sophisticated techniques. Currently the main vector of attack is copied card details via camera phone or other means being used to order goods after which the delivery address is changed or the goods intercepted on delivery.

'The online shopping environment is often portrayed as a haven for criminals and tricksters, but this simply isn't the case,' said Jo Tucker, managing director of the Interactive Media in Retail Group (IMRG). 'The continuing growth of online spending will inevitably prove tempting for criminals, but the industry is demonstrating a mature approach to tackling the problem.'