A survey of retail merchants finds that online fraud rates are
declining to about the same rates reported by brick-and-mortar stores,
while fraud spikes and fraudsters' use of increasingly sophisticated
schemes are keeping retailers on their toes, according to the Merchant
Risk Council (MRC), an trade association.
Fraud rates for in-person credit-card transactions are usually less
than 0.1% of sales. The council's fifth annual survey found that 48% of
online retailers surveyed said that their chargebacks now match that
rate, a significant improvement over previous years when online fraud
outpaced card present fraud by as much as five times.
"The numbers show a very positive trend, but fraud still requires
vigilance from online retailers," said Julie Fergerson, co-chairman of
the Merchant Risk Council.
"As fraud prevention tools gain widespread use, their effectiveness
declines, and fraudsters are always looking for ways to 'beat the
system.' Most of our members realize this, and 76% of them have either
maintained or increased their review staff levels, thus keeping their
shoppers safe," she said.
As the adoption of fraud prevention tools increases, their
effectiveness often decreases as scam artists find ways to work around
the security tools.
Since 2001, online merchants report that the effectiveness of
Address Verification Systems, for example, has dropped from 70% to 25%,
although its use rose from 70% to 83% over the same period. Similarly,
the adoption of Card Verification Codes increased from 38% to 73%, but
merchants report a decline in its effectiveness from 49% to 31%.
Source: Merchant Risk Council
