Intl eCommerce Presents Hazards for US/Canadian Merchants
International eCommerce can be a risky undertaking for U.S. and Canadian merchants, according to new data from CyberSource.
During 2008, 30% of surveyed merchants that accept international orders online stopped taking orders from one or more countries due specifically to high levels of fraud. 76% of merchants in that group shut off orders from Nigeria, 58% froze out Ghana, and 32% slammed the door on Pakistan. Other countries blocked in 2008 included Indonesia (23%), Singapore (19%), Romania (18%), China, Russia, and Vietnam with 13% each and South Korea and Hong Kong with 10% each.
“International eCommerce represents great opportunity and challenge— simultaneously,” said Doug Schwegman, CyberSource director of market and customer intelligence. “Growth rates beyond U.S. and Canadian borders remain considerably higher than here. So during difficult economic times, expanding international eCommerce is a logical move for many merchants. But overall rates of fraud require merchants exercise great care in handling orders received.”
Accepting international orders is common among U.S. and Canadian merchants. According to the survey, over half (52%) of eCommerce merchants today accept orders from abroad—and those orders now account for 17% of their total sales. But fraud rates are high and climbing. Merchants say 4% of international orders turn out to be fraudulent—that’s 3.6 times the domestic rate of 1.1%. The international fraud rate has increased 67% since 2005.
Given the fraud risk that exists with overseas orders, it is no surprise that merchants reject more orders from abroad. The rate of order rejection due to suspicion of fraud on international orders is almost four times that for orders originating in the U.S./Canada. In 2008, nearly 11% of international orders were given the thumbs down—compared to 2.9% of orders that came from Northern North America. U.S./Canadian eCommerce also has fraud centers
The survey data also showed some leading centers for eCommerce fraud in the U.S. and Canada. Fully 25% of respondents said New York “presented the highest risk of fraud” among cities in the U.S. and Canada. Miami was second at 21% and Los Angeles a distant third at 9%. Question/Survey details
Questions about country and city origins of eCommerce fraud were part of a larger survey, the tenth annual CyberSource fraud survey, commissioned by CyberSource Corporation and undertaken by Mindwave Research. The survey was fielded October 21 through November 11, 2008, and yielded 400 qualified and complete responses from U.S. and Canadian eCommerce merchants. The sample was drawn from a database of companies involved in electronic commerce activities. Incentive to respondents included a summary of the research.
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