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February 22, 2010

Fraud rates on international business decrease by half in 2009, CyberSource survey

International orders rejected due to suspicion of fraud dropped 30% in 2009

By CBR Staff Writer

A survey of eCommerce merchants by CyberSource has shown that among the US and Canadian merchants accepting international orders, 21% of their online orders came from abroad, up from 17% the year before and 8% in 2005.

The firm said that the growth was supported by progress in meeting the increased fraud challenge of international orders, with 50% lower fraud rates and 30% lower order rejection rates.

According to the 11th annual Online Fraud Report, the country origins of the international orders have favoured English speaking and larger eCommerce markets. 81% of merchants surveyed that accept orders from abroad said that they took orders from the UK and 72% from Australia. These were followed by Germany (71%), France (68%), and Italy and Mexico (64% each).

The US and Canadian merchants surveyed say that they saw fraud rates on international business drop 50% in 2009, from an average of 4% in 2008 to 2% in 2009, compared to 1.2% on orders with domestic origins. International orders that were rejected due to suspicion of fraud dropped 30% in 2009, from 10.9% to 7.7%.

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According to the survey data, 20% of US and Canadian merchants that take orders from abroad stopped accepting orders from at least one country due to high fraud levels in 2009. Among that group, half of them cited Nigeria and 45% cited Ghana. Other countries include Indonesia and Malaysia (30% each), Iran, Pakistan, Romania and Russia (23% each), and China and Vietnam (20% each).

Doug Schwegman, director, customer and market intelligence of CyberSource, said: We see this as a meaningful trend in eCommerce – real evidence of increasing globalisation. We think the trend was driven in part by merchants’ needs to find new sources of revenue in a challenged economy, but also by merchants’ growing ability to manage fraud on international orders.

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