E-payment Fraud Projected to Hit $4 Billion

The economy is in turmoil, people are loosing their homes and more and more people are feeling the need to get out of their obligations.
As we wrap up another Christmas season and finish up 2008, the fraud stats are rolling in.

Any of you who sell products have encountered the notorious chargeback and the occasional "lost" package complaint.
You'll be unhappy to hear its not getting any better but you aren't alone. You're not the only retailer to suffer with fraud.
In the recent issue of Internet Retailer the numbers are out.

E-commerce fraud losses in the US and Canada are expected to reach $4 Billion in 2008 -- an 11% increase from the $3.6 billion in 2007. These stats are according to CyberSource Corp's survey of e-commerce fraud.

They go on to report that Chargebacks accounted for almost half of the 2008 online payment fraud losses. The percentage of online revenue lost to fraud held steady from 2007 at 1.4% of online sales.

Its estimated that merchants fight only about 50% of the fraud chargebacks. Merchants that do challenge only recover 28% of that revenue. Thats a horrible low percentage considering the time it takes to challenge a chargeback.

The biggest culprit - consumer electronics. The fraud rate of electronics is 2% which is nearly double the rate of other categories.

It was also determined that merchants with online revenues of $5 million to $25 million faced the most fraud. Perhaps its because those merchants spend less time on manually examining orders.

So what does this mean to you?
Lots - it means if you sell physical products, spend the time evaluating the order. Listen to your instincts. Call the customer to verify. Take steps to protect yourself with tracking and signature delivery.
Report suspicious credit card behavior.

Don't be afraid to reject orders and fire customers.