** Credit-Card Fraud 12 Times Higher Online
Online merchants are literally paying the price for not knowing
their customers, according to a new Gartner Group study.
Researchers found that credit-card fraud on the Internet is a
whopping 12 times higher than that at conventional stores--a
discrepancy that translates into merchant fees high enough to hurt
the profitability of E-businesses.
The survey, which tracked credit-card fraud at 165 conventional,
online, and hybrid retailers, found that 1.15% of all online
purchases were fraudulent, compared with only 0.06% to 0.09 % of
purchases made in the real world. And, 64% of all charge-backs,
where consumers are credited for charges made on their cards, are
the result of fraud in the online world, while only 44% of charge-
backs in offline businesses are fraudulent.
"Fraud is easier on the Internet, where you're dealing with
anonymous entities. You don't have to walk into a store and sign a
receipt," Gartner analyst Avivah Litan says. "This is not just a
mom-and-pop issue. And it's really eating into the margins of
online merchants, who not only have to absorb all the cost but
also pay much higher fees to credit-card companies, resolve
disputes, and absorb the cost of those disputes."
So what's a Web site to do? If you can afford it, use a fraud-
protection service such as CyberCash or an Internet money system
such as PayPal, though that will eat into your revenues, too,
Litan says. "You're always going to have to support credit cards
if you want to do business with consumers." - Cheryl Rosen