Online fraud set to increase as management budgets stagnate


Online fraud set to increase as management budgets stagnate

Warwick Ashford

Online fraud is likely to increase as 77% of UK merchants predict positive growth in eCommerce in 2011, a survey of 200 UK merchants has found.

Only 2% of merchants expect a decline in eCommerce in 2011, but key fraud metrics are not improving, according to latest UK Online Fraud Report by payment management company Cybersource.

On average, 1.9% of 2010 orders accepted resulted in fraud, compared with 1.6% the previous year, and over a third of businesses are expecting to see the percentage of web revenue lost to fraud to grow year-on-year.

Despite this, 59% of respondents expect fraud management budgets to remain stagnant in 2011, and 10% expect budgets to decrease.

As organisations look to drive more online revenue, it is vital to protect themselves from fraud, said Akif Khan, co-author of the report and director products and services at Cybersource.

But, he said, it need not necessarily mean increased budget as, by simply improving processes for screening transactions and reviewing them, merchants can reduce costs.

Merchants should adopt a two-pronged approach, he said, to fine-tune the automatic screening processes and make the manual review processes as fast and efficient as possible. While some respondents reported reviewing 120 transactions a day, others were able to manage only 77 transactions a day.

"The survey also shows that, on average, merchants are reviewing 20% of incoming orders, up 2% on 2009, but 71% of those are being approved, which means too many are going to review," said Khan.

But many merchants miss the opportunity to optimise processes, either because of a lack of awareness or due to the fact they are constantly in fire-fighting mode to handle the review cues and meet fraud and review KPIs, they fail to see the bigger picture, said Khan.

Some merchants may have to invest in case management systems, he said, but the business case can be made by balancing this cost against the cost of extra staff to fill the gap between the current review capacity and projected volumes.

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