Low-tech online fraud detection stays on – study

The survey of 307 US retailers, commissioned by CyberSource and conducted by Confirmit, has discovered that 83% if US-based companies conduct manual reviews of online orders, and on an average they review 29% of orders manually. On average, 46% of online fraud budgets are dedicated to order review staff, compared to 32% on internally developed tools and systems and 22% on third-party tools and services.

Also, fraud management budgets are essentially flat. 61% of survey-takers expect their budgets for fraud management operations to stay the same over the coming 12 months, and 7% even expect them to decline.
Online fraud rates are going down in the major CNP transaction channels of web and mobile. On average, respondents lost 0,8% of their online revenue to fraud in 2015, compared to 0,9% in 2013 and 1% in 2012. In the mobile channel, the percentage of online revenue fraud loss dropped to 0.,5% in 2015, from 0,9% in 2014 and 1,4% in 2013.

However, ecommerce fraud losses represented 0,5% of respondents’ online revenue in 2015, down from 0,8% in 2013, but slightly up from 0,4% in 2012.

The percentage of fraudulent online transactions that are discovered by banks or other payment providers, known as chargebacks, has dropped substantially to 28% in 2015 from 43% in 2012. CyberSource says this decline is due to factors including retailers encouraging customers to set up online accounts and issuing more credits to trusted shoppers.

The rate of disputed online chargebacks stays at 53% and the percentage of disputes retailers win has slightly risen to 43% from 41% in 2013.

The study also looked at rates of adoption of online fraud detection tools. The most-used solutions include address verification service (86%), card verification number (86%), postal address verification services (67%), and Google Maps lookup (64%). Only 1% use biometric indicators, such as a fingerprint or retina scan.