Online retail fraud on the rise – report

Nearly half of all UK retailers have seen online fraud levels rise in the last 12 months, according to research published today.

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Nearly half of all UK retailers have seen online fraud levels rise in the last 12 months, according to research published today.

Large merchants were hit the hardest in terms of actual losses, with over 25% of the 165 retailers interviewed for the Cybersource Online Fraud Report recording losses from online fraud up more than 10% on the previous year.

But smaller merchants were subjected to many more fraud attempts. The main techniques involved the use of card generators – software programs that generate possible card numbers against a specific set of customer data. These were used in 48% of stores with a turnover of under £1m as opposed to 22% of larger rivals.

And fraudsters tried using multiple identities against a single card in 42% of small merchants, as opposed to under a third of large stores, according to the research, which was conducted by Vanson Bourne on behalf of electronic payment and risk management software firm CyberSource.

Many small retailers were hit hard in the pocket as they invested in anti-fraud technology. Small businesses expected to spend up to £65,000 on the technology, and many large businesses with over £50m annual revenues will spend over £500,000.

Stores typically implemented as many as five or six different defence techniques or products. The most common were rules based automated decision engines, such as CyberSource’s own Decision Manager software, as well as systems and services such as address and card verification number checking.

Last year, high street fashion retailer Monsoon said it was mining sales data to tackle refund fraud, where stolen goods were being refunded onto credit cards, or used goods returned for a refund. Staff were also buying clothes at a discount and refunding them at full price elsewhere.

Jo Evans, managing director at the Interactive Media in Retail Group, an online retail body, said it was important for retailers to act more effectively to prevent fraud. “Online retail continues to grow at a phenomenal rate, and the infrastructure to support it cannot always keep up.

“At the moment law enforcement policies and practices may be lagging behind but as an industry we also need to look at ways that we can work together more effectively,” she said. Only 17% of merchants said they believed the police were tackling the problem properly or acting on tip-offs.

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