The fraud rate by order has witnessed a 33 percent decrease, from 0.9 percent in 2010 to 0.6 percent in 2011, which is the lowest rate in the 13 year history of the survey, according to the 13th annual survey of e-commerce fraud release by global payment services provider CyberSource.

According to the findings of the study, merchants have indicated that 1 percent of online revenues were lost to fraud in 2011, a slight increase over last year's 0.9 percent. This 1 percent of online revenues lost to fraud in 2011 translates to an estimated 2011 merchant dollar loss of approximately USD 3.4 billion. This is the first time merchants have cited an increase in the fraud rate by revenue since 2004. The lower fraud rate by order, accompanied by higher estimated revenue loss, means fraudsters are stealing more expensive items, namely USD 250 on average vs. USD 150 on average for a valid order.

Furthermore, analysing fraud rates by category of merchandise, consumer electronics has been the category with the highest fraud loss, followed by digital goods.

In 2011, merchants used an average of 4.9 fraud detection tools to automatically screen orders, compared to 4.6 in 2010. Merchants with more than USD 25 million in annual online revenues used about eight tools in 2011 (vs. 7.4 in 2010). Manual review is an effective but expensive strategy, typically accounting for 52 percent of merchants' fraud management budgets. Merchants that engage in manual review (75 percent of the sample), looked at 27 percent of their orders in 2011, up from 24 percent the prior year. To complete manual screening, merchants have reported that review staff accessed an average of 4.2 systems and information sources in 2011, continuing the upward (more expensive and time-consuming) trend seen since the 3.7 systems reported in 2009.

Merchants in 2011 ultimately accepted 75 percent of the orders that they manually reviewed, of which 6 percent turned out to be fraudulent--ten times higher than the overall 0.6 percent fraud rate by order.

Almost 60 percent of merchants involved in the survey accept orders from outside of the US and Canada. However, merchants are still taking a cautious approach, rejecting 7.3 percent of international orders (vs. 2.8 percent of orders originating in North America), which is over 2.5 times higher. This prudence is determined by high international fraud rate by order (2.0 percent, over 3 times higher than the fraud rate by order for North American orders, 0.6 percent). One quarter of respondents have mentioned that their company stopped accepting international orders altogether due to the fraud risk - 50 percent of that group specifically citing Nigeria as a high risk area. Merchants looking to grow their international sales channel may need to employ additional tools to detect sophisticated fraud, such as global transaction activity modelling, website behaviour analysis, device fingerprinting, and IP geolocation.

The study has pointed out that 27 percent of respondents are engaged in mobile commerce and initial indicators regarding fraud in that channel are promising. Among those tracking fraud rates in this comparatively new channel, the majority (92 percent) feel fraud is equal to or lower than that experienced with online orders.

The 13th annual CyberSource fraud survey was commissioned by CyberSource and executed by Mindwave Research. The survey was carried out between 13 September and 12 October 2011 and yielded response from companies representing a total of USD 83.8 billion in online sales, which accounts for 24 percent of the total estimated online market for 2011 (325 qualified and complete responses). The sample was drawn from a database of companies involved in electronic commerce activities.