Survey: Low-tech online fraud detection remains popular
Manual security remains prominent among North American retailers despite a predicted increase in fraud related to card not present (CNP) transactions.
According to the “Annual Fraud Benchmark Report,” a survey of 307 North American retailers commissioned by payment management company CyberSource Corp. (a Visa subsidiary) and conducted by Confirmit, 83% of North American businesses 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.
In addition, fraud management budgets are essentially flat. The majority of respondents (61%) expect their budgets for fraud management operations to stay the same over the coming 12 months, and 7% even expect them to decline.
However, despite a frequent reliance on manual order review and flat budgets, not all online fraud news is bad. For example, 62% of respondents track fraud losses by order channel. According to CyberSource, tracking fraud losses by order channel puts businesses in a better position to tune and improve their fraud management performance in each of the channels they serve.
And 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, e-commerce 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.
Retailers are also rejecting more online orders due to suspicion of fraud. Respondents rejected 2.8% of U.S. and Canadian online orders for this reason in 2015, compared to 2.3% the prior year.
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 has remained level at 53%. In one other good piece of chargeback-related news, 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.
According to the “Annual Fraud Benchmark Report,” a survey of 307 North American retailers commissioned by payment management company CyberSource Corp. (a Visa subsidiary) and conducted by Confirmit, 83% of North American businesses 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.
In addition, fraud management budgets are essentially flat. The majority of respondents (61%) expect their budgets for fraud management operations to stay the same over the coming 12 months, and 7% even expect them to decline.
However, despite a frequent reliance on manual order review and flat budgets, not all online fraud news is bad. For example, 62% of respondents track fraud losses by order channel. According to CyberSource, tracking fraud losses by order channel puts businesses in a better position to tune and improve their fraud management performance in each of the channels they serve.
And 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, e-commerce 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.
Retailers are also rejecting more online orders due to suspicion of fraud. Respondents rejected 2.8% of U.S. and Canadian online orders for this reason in 2015, compared to 2.3% the prior year.
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 has remained level at 53%. In one other good piece of chargeback-related news, 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.