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A Look at Global eCommerce and Declining Fraud Rates

CyberSource reports that its 11th annual Online Fraud Report shows that among U.S./Canadian merchants accepting international orders, 21% of their online orders came from abroad, up from 17% the year before and 8% in 2005. According to the company, "this steady growth is supported by dramatic progress in meeting the increased fraud challenge of international orders, with 50% lower fraud rates and 30% lower order rejection rates."

"We see this as a meaningful trend in eCommerce — real evidence of increasing globalization," said Doug Schwegman, CyberSource's Director, Customer and Market Intelligence. "We think the trend was driven in part by merchants' needs to find new sources of revenue in a challenged economy, but also by merchants' growing ability to manage fraud on international orders."

The country origins of these international orders favored English speaking and larger eCommerce markets. Eighty-one percent of merchants surveyed that accept orders from abroad said they took orders from the U.K.; 72% from Australia. Following those were Germany (71%), France (68%), and Italy and Mexico (64% each).

Surveyed U.S./Canadian merchants say they saw fraud rates (accepted orders that turned out to be fraudulent) on international business drop 50% in 2009—from an average of 4% in 2008 to 2% in 2009 (this compares to 1.2% on orders with domestic origins).

International orders that were rejected due to suspicion of fraud dropped 30% in 2009, from 10.9% to 7.7%. "These global numbers may be higher than their domestic equivalents, but clearly, more merchants now feel they have the controls in place to better control the risk," added Schwegman.

Even with tighter controls, online fraud remains a concern. According to the survey data, 20% of U.S. and Canadian merchants that take orders from abroad stopped accepting orders from at least one country due to high fraud levels in 2009. Among that group, fully half cited Nigeria and 45% cited Ghana. Other countries high on the watch list included Indonesia and Malaysia (30% each), Iran, Pakistan, Romania and Russia (23% each), and China and Vietnam (20% each).

The survey also outlined some high fraud areas closer to home. Thirty-three percent of merchants stated that New York represented the highest risk of any U.S. or Canadian city when accepting domestic orders. New York was followed by Miami with 19%, and Los Angeles with 10%. Among Canadian cities, 4% of merchants said Montreal and Toronto each represented the highest risk of online fraud.

The eleventh annual CyberSource fraud survey was commissioned by CyberSource Corporation. The survey was fielded September 10 through October 7, 2009 and yielded 352 qualified and complete responses. The sample was drawn from a database of companies involved in electronic commerce activities. Incentives to respondents included a summary of the research.

To obtain a copy of the survey results see: http://www.cybersource.com/fraudreport2010

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