Cyber fraud hitting online retailers hard

The rising tide of cyber crime is hitting the income of Britain’s burgeoning e-commerce sector by an estimated £580m a year, according to new report.

Research carried out by pay-as-you-go Visa voucher firm 3V, in conjunction with online retail industry body IMRG, shows that almost two thirds (64%) of internet retailers have fallen victim to fraudsters, and it’s costing some of them as much as 5% of their annual turnover.

The ‘3V e-Fraud Barometer’ shows that over a third (36%) of retailers have experienced a marked increase in fraudulent activity online since the introduction of ‘chip and pin’ on the high street.

Recent IMRG figures suggest annual online sales could surge to £78bn over the next three years, meaning by 2010 cyber fraud could cost retailers a massive £1.5bn per annum. And with both sales figures and CNP fraud cases on the rise, more than two in five (43%) retailers said the threat of being hit by fraud is becoming a bigger concern by the day.

Andrew McClelland, director of projects and marketing at IMRG, said: “The research from 3V highlights just how serious the problem of internet fraud has become for the online retail industry. While the industry is rapidly expanding it obviously provides a tempting target for fraudsters.

“Retailers have told us that a range of tools and techniques provide the best defence against fraudulent activity but these should not increase costs significantly, or provide a barrier to legitimate customers.”

While two thirds (64%) of retailers are upping the security measures in place on their websites, a fifth (21%) of them feel systems introduced in the last three years by payment providers are placing an increased burden on the consumer.

Two thirds (64%) of retailers quizzed in the 3V study said that their customers have difficulty in signing up to the likes of Verified by Visa and Mastercard SecureCode, citing reasons such as the need to remember multiple passwords. Nearly three in five (57%) online merchants have no plans to introduce either system onto their sites either now or in the future.

Kieron Guilfoyle, CEO of 3V Transaction Services, said: “While some giant steps have been taken by the retail and payments industries in the last few years to combat the problem of CNP fraud, the impact it is having on some e-retailers is immense.



“And that’s why the growing use of safe shopping products like 3V Vouchers is good news. We devised a system using randomly-generated Visa numbers with security details delivered separately to the customer’s mobile phone – effectively creating a ‘chip and pin’ for shopping online. And the bonus for retailers is that there are no changes needed to their software infrastructures as 3V Vouchers are processed just like a VISA credit card number, and so there is no added cost for any retailer to accept the vouchers.”

3V Vouchers were introduced in the UK in November 2006, following a successful year-long pilot in the Irish Republic and with over 120,000 people registered, there hasn’t been one case of fraud reported by merchants where 3V Vouchers have been used.