Cybersource have produced their eighth UK Online Fraud Report– 2012, a summary of the report is below.
The respondents to this year’s report came from a balanced group of merchant, classified as:
- Medium business (annual online revenue of £500,000-£5m)
- Large business (£5m-£25m)
- Very large business (more than £25m)
- Small business respondents (less than £500,000) accounted for 23% of the survey base
- 20% Travel (excludes airlines, which are covered by a separate global fraud report)
- 28% Physical goods
- 28%. Services
- 24% Digital goods
Looking forward to 2012, the largest proportion of merchants (42%) expects to see fraud rates unchanged. On average, 37% foresee higher rates though there is a noticeable difference between expectations of the digital goods market versus the other sectors covered by this report; a lower proportion of digital merchants (31%) expect rates to grow.
Cards Remain Prevalent with Small Merchants
Credit and debit cards remain the most popular form of payment acceptance by some margin (nearly double the next most prevalent payment method). Whilst PayPal is less popular amongst larger merchants it is accepted by 52% of the very smallest merchants; furthermore 65% of digital goods respondents stated that they offer this payment method. Bank transfers have also gained in popularity, now accepted by 61% of small merchants and particularly prevalent in the services sector (64%) where direct debit (42%) is also popular.
Cash on delivery or, more importantly, in-store payment/pick-up is now an option for 26% of merchants, and is more common amongst the middle tier than the very largest. The biggest merchants are more likely to offer gift cards and certificates, accepted by 43% versus 11% of the smallest businesses (larger organisations may have their own programmes or be part of wider industry initiatives).
Mobile operator billing now forms part of the income stream for 8% of merchants, and is focused on the top end (online revenues more than £25m) where 15% of companies now accept payments this way. Overall, 38% of companies have a mobile-optimised commerce site, with the travel sector leading the way (56%). 26% of respondents have their own mobile app, rising to 30% for the physical goods businesses. Given the potential development costs, it is the largest companies that are much more likely to have an app (43%) versus the smallest (7%).
Over a third of businesses expect their total losses from fraud to grow in 2012
Percentage of orders rejected on the fear of fraud
- merchants are rejecting on average 4.3% of incoming orders due to suspicion of fraud
- 31% of merchants report that they are rejecting more than one in 20 orders on suspicion of fraud
Martin Pearce Head of Loss Prevention at thetrainline.com was quoted in the report saying:
“The role of fraud prevention is an ever changing one; as the fraudster adapts so there is a need for the merchant to change in line with that behaviour. Key to this is the ability to detect fraudulent behaviour as close to real time as possible and then adapt, making changes quickly to counteract the latest threat. I liken fraud prevention to a game of chess; taking skill and strategic planning to get it right, especially when you are potentially playing a few moves behind the fraudster. Customer needs are ever changing too, with merchants looking to ensure that order and delivery/collection mechanisms are as easy and convenient as possible. Mobile devices have been playing an increasingly important role in transaction growth over the last few years, with a wide, and evolving, array of devices now on the market, all with internet access. Apps are also evolving; shifting from information stores to become purchasing and fulfilment instruments.
My view is that fraud hasn’t changed, but fraudsters have. They are more organised and being given new platforms through which to conduct activity. Any new purchasing process or platform is of real interest to the fraud community and will receive a lot of attention. You should ensure that your business is prepared, and able to manage such transactions (good and bad). Any success on behalf of the fraudster is likely to lead to further abuse at some stage.
Finally, whilst much focus is placed on identifying fraudulent behaviour, it is just as important to recognise the behaviour of good customers. Fraud identification is similar to looking for needles in haystacks; if you are adept at identifying good behaviour then you can substantially reduce the size of haystack at the start of the process; cutting your manual review workload and making the needles (or fraudsters) easier to spot and handle. In my experience, utilising tenure thresholds and monitoring on-going transaction behaviour can certainly help to identify genuine buyers. Furthermore, encouraging customers to manage their online activity via a dedicated user account area on your website not only provides you with valuable marketing data; you also gain much deeper insight into who your trusted customers are and how they behave.”
Find the full report here.