In the UK, the impact of fraud varies by sector, showing the diversity of online merchants. The biggest concern for the travel and services sectors is sheer revenue loss. 51 percent of travel and 46 percent of services vendors have indicated that revenue loss is the greatest fraud concern, a recent survey has revealed.
According to the eighth annual "UK Online Fraud Report” released by global payment services provider CyberSource, the main challenge for digital goods businesses is the cost of manually reviewing too many orders (41 percent). For physical goods retailers the challenge is different: 50 percent have stated that their greatest concern is inadvertently turning away good orders.
Looking forward to 2012, the largest proportion of merchants (42 percent) expects to see fraud rates unchanged. On average, 37 percent of merchants foresee higher rates though there is a noticeable difference between expectations of the digital goods market versus the other sectors covered by this report; a lower proportion of digital merchants (31 percent) expect rates to grow.
Since the 2009 survey, the percentage of merchants using manual review has decreased by 10 percent, with 61 percent of merchants reporting that they engaged in manual review in 2011. The practice remains most common in small businesses where one fifth of respondents review almost every order. When it comes to very large merchants, they are the most efficient users of manual review, examining only 11 percent of orders on average.
The report has also indicated that manual review remains inefficient: merchants ultimately accept 75 percent of the orders they review. These results suggest merchants should improve their automated order screening procedures to increase detection accuracy and lower the need for manual review.
The mobile channel is also a real opportunity for merchants, according to Dr Akif Khan, co-author of the report and director of products and services for CyberSource in the EMEA region. “38 percent of merchants have a dedicated mobile website and 26 percent have their own app. However, just a quarter of those merchants are tracking fraud originating on their mobile site and only 16 percent are tracking fraud through their mobile apps”, stated Dr Akif Khan.
According to the findings of the study, digital goods businesses are growing particularly strongly; those anticipating growth in 2012 are forecasting an average 33 percent increase in online revenues. 73 percent of merchants expect online revenue growth in 2012, while 24 percent forecast no change. Smaller businesses (annual online revenue less than GBP 500,000) are the most optimistic, with ambitious plans for 35 percent growth on average. The largest businesses (those greater than GBP 25m annual online revenue) are more conservative, forecasting an increase of 18 percent.
The survey was carried out from 5 to 30 September 2011 and yielded 200 qualified responses. The sample was drawn from a database of companies involved in e-commerce activities, including both CyberSource and non-CyberSource merchants.