Annual Fraud Report Hot Off the Press

I got the early edition of Cybersource’s 9th annual fraud report today. I haven’t had time to fully absorb/read all of the information but there were some facts that jumped out at me:

  • 82% of merchants are manually checking orders today with 1 out of 3 orders being manually reviewed. Merchants also indicated that over three-fourths of the orders manually reviewed were accepted.
  • Online merchants increased their spending on manual review staff in 2007 by as much as $100 million.

What does this mean? Online merchants still need to embrace automated fraud detection tools including identity verification to keep pace with the growing ecommerce trends. Of course, the report did cover fraud detection tools as well.

  • More than three-fourth’s of the merchants said they use 3 or more fraud detection tools with the average being 5.
  • The two that top the list are Address Verification (80%) and Card Verification Number (74%). The 3rd tool choice, which is Company Specific Fraud Screens, shows a significant usage drop to 39%.
  • 6% are using out-of-wallet or in-wallet challenge questions

What does this mean? More education is needed about identity verification including KBA solutions. Merchants need to understand the limitations Address and Card Verification Solutions have when it comes to fighting fraud and how using both basic id verification combined with KBA in scenarios where higher verification is needed reduces the need for manual review. We developed a whitepaper specifically for retail merchants last quarter that addresses these issues. I think it is probably time I talk with the marketing department about promoting that paper a bit more…

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