According to the "8th Annual Online Fraud Report," released by CyberSource, losses from online fraud in the US and Canada in 2006 totaled $3 billion, a 7% increase over 2005.
But the percentage of revenues lost to fraud improved slightly — dropping to 1.4% in 2006, down from 1.6% the year before.
This is the third consecutive year to show a decline in the percentage rate of revenue loss, but because e-commerce sales continue to grow at more than 20% a year, the overall dollar-loss amount showed a rise.
With only 1% of accepted orders ultimately turning out to be fraudulent, merchants are erring on the side of caution by rejecting roughly 4% of their incoming orders due to suspicion of fraud. That means about 3% of total e-commerce revenues may be lost each year as valid orders are turned down.
For US and Canadian online merchants, overseas orders present the most risk.
While 61% of online merchants accept orders from outside the US and Canada, and those orders represent 17% of their total order volume, respondents reported that in 2006 2.7% of those orders were fraudulent, a rate 2.5 times higher than the rate associated with US and Canadian orders.
Not surprisingly, merchants report that they reject 12.7% of international orders, a rate three times higher than orders originating in the US or Canada.
