Quantcast

Online Fraud Costs Rose in 2011, Visa Unit Says

Print
Email
Reprints
Comment
Twitter
LinkedIn
Facebook
Google+
Partner Insights

The dollar volume of online fraud is going up, but actual incidents of fraud are decreasing, according to a report released Tuesday by CyberSource Corp., a unit of Visa Inc.

Total online fraud was up 1%, to $3.4 billion, but the number of fraudulent transactions was down 3 basis points to 0.6% in 2011 compared to a year ago. The increase in fraud dollar volume, while small, was the first increase since 2008, the report said.

"The drop in the fraud rate is excellent news, but clearly we still have a long way to go in our war on fraud," says Andrew Naumann, senior business leader for fraud management solutions for CyberSource.

Criminals have gotten a lot better at covering their tracks, Naumann says. And while merchants have become more sophisticated and more diligent about fighting fraud, it's harder to detect.

Criminals have become experts at disguising Internet Protocol addresses and they are discovering ways to avoid device fingerprinting, Naumann says.

"Fraud orders are looking more and more like real orders for merchants, and to better identify them they need to add more tools to their stable," says Lauren Wang, business leader for solutions marketing for CyberSource.

Fraudulent order values are on average $250, compared to $150 for valid orders, according to the report.

Approximately 52% of current merchant fraud budgets goes toward manual review, Naumann says, which is more costly and time-consuming than automated review. Budgets need to shift toward more automated processes that include more data analysis and sharing data across merchants.

"An increasing trend in ecommerce fraud is the … tendency to leverage consortium data to alleviate fraud," Julie Conroy McNelley, a senior risk and fraud analyst at Aite Group LLC, wrote in an email.

"While slower to embrace this model than the banking world, shared fraud networks are increasingly common among online merchants, and a great tool in their arsenal," McNelley wrote.

More than half of merchants surveyed in the report said automated review was their top priority in 2012.

"The fraud that is successfully going through is … perpetrated by the more sophisticated fraudsters, those guys do their homework, and know how to maximize the value of their crime," McNelley wrote.

The survey of 325 merchants was conducted between September and October, 2011. CyberSource is based in Mountain View, Calif.

JOIN THE DISCUSSION

SEE MORE IN

RELATED TAGS

2014 Summer Reading List for Bankers
Summer Reading List for Commercial Bankers 2014

American Banker asked readers, BankThink contributors and staff members to recommend books for bankers to take on their summer vacations. Share your own suggestions in the comments section below.

Related links: Last year's list, the 2012 list

Image: ThinkStock

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.
Already a subscriber? Log in here
Please note you must now log in with your email address and password.