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Merchants Are Using More Tools More Effectively, to Combat Online Fraud, According to Annual Survey by the Merchant Risk Council


NEW YORK, NY -- 11/22/2004 -- Online merchants are reaching deeper into their arsenal of fraud prevention tools to more effectively combat criminals they believe to be increasingly sophisticated, according to a survey of merchants about online fraud trends released today by the Merchant Risk Council (MRC), a non-profit organization consisting of online merchants, vendors, financial institutions and law enforcement agencies.

Merchants are using more tools to combat online fraud, with a 13% increase in the number of tools used to combat fraud over what they reported in 2003. At the same time, 60% of the merchants polled believe fraudsters are more sophisticated, and a large majority (77%) experienced a fraud spike in the past 12 months; of these, 21% experienced a significant fraud spike.

“Fraud prevention technologies and strategies are more than matching new and evolving types of fraud,” said Tom Sullivan, Director of E-Commerce Risk with InterActiveCorp Travel and board member of the MRC. “For consumers, it is safer than ever to shop online. As fraud prevention tools are optimized, more and more merchants are reporting best practices. For example, more merchants have reported they now review 3-10% of their online transactions, which is the optimal range. This success is reflected in reduced numbers of credit card transactions that merchants must absorb (chargebacks). More merchants are reporting chargeback rates of less than 0.3%.”

“Merchants who are aligning fraud prevention tools with their business needs are realizing a greater return on their fraud prevention investments,” said Julie Fergerson, Co-Chairman of the Merchant Risk Council and Co-Founder of ClearCommerce. “While merchants are currently having success combating online fraud, adding the right new technologies and processes will provide additional successes down the road. ’Customizable rules,’ for example, was found to be the most effective fraud prevention tool, but is only being used by 53% of merchants. The most important first step is to create metrics on fraud prevention tools.” More than 20% of the merchants polled still do not establish metrics for their fraud prevention.

The annual survey of 292 online merchants was completed in September of 2004. Responses are reported for small merchants (less than $100,000 in annual online revenues), medium-sized (revenues between $100,000 and $1,000,000), large ($1 - $25 million), and very large merchants ($25 million and up). Findings from the survey include:

-- The fraud prevention tools that merchants most commonly use are address verification systems (74%), customer follow-up (70%), card verification codes (65%), negative files (55%) and real-time authorization (54%).
-- The fraud prevention tools that merchants find the most useful are customizable rules (50%), customer follow-up (47%), negative file (43%), post-process fraud management (40%) and real-time authorization (39%).
-- Although on the decline, fraud on transactions that originate outside the U.S. is still considered a problem. 20% of very large merchants said international fraud is a “big problem or out of control”; the figure was 27% in 2003. Among large merchants 32% identified international fraud as a “big problem or out of control”; the figure was 42% in 2003. 29% of medium-sized merchants identified international fraud as a “big problem or out of control”; the figure was 45% in 2003. 26% of small merchants identified international fraud as a “big problem or out of control”; the figure was 35% in 2003.

Of the 292 merchants who participated, 56 are small merchants, 67 are medium-sized merchants, 93 are large merchants and 76 are very large merchants.
The Merchant Risk Council consists of 7,500 merchants, vendors, financial institutions and law enforcement agencies. Its members share the common goal of protecting and encouraging the thriving online commerce industry by establishing best practices for cyber-fraud prevention. In addition, the MRC works with federal and local law enforcement agencies such as the Federal Bureau of Investigation, Secret Service, the U.S Department of Justice and the U.S. Postal Inspectors to help catch and prosecute cyber criminals. The Board of Directors consists of 15 leading e-commerce retailers, solution providers and financial institutions including, American Eagle Outfitters, American Express, Apple Computer, Barnes &, Best Buy, ClearCommerce, CompUSA, CyberSource, Discover Network, Experian,, InterActiveCorp Travel, Orbitz, Inc. and Zale Corp.

Members of the press please contact Susan Henson, Public Relations, Experian at 714 830 5129, a board member of MRC. To learn more about the Merchant Risk Council and other consumer cyber-fraud resources, go to To become a member of MRC contact:


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