±±¾©Èü³µpk10

Small-time credit card fraud is 10 times higher on the internet than in bricks and mortar stores. A fifth of online retailers are experiencing fraud levels in excess of one per cent of sales, with some as high as 10 per cent.

Not only is this more than traditional high-street retailers, it is far higher than the level of hacking or other "sophisticated" criminality. Web merchants are more likely to be forced to bear the liability and costs in cases of fraud, while credit card companies generally absorb the fraud for traditional retailers (as long as the retailer saves a physical signature on a credit card transaction receipt). The credit card companies call this phenomenon "chargeback".

The fraud is made easy by the lack of security precautions among retailers.

Only 15 per cent of companies said they had automated systems for detecting fraud, according to a survey conducted for Experian, which has an interest in encouraging retailers to use its credit-checking services.

The survey, which covered some 800 retailers, shows that online retailers either do no checking or rely almost totally on manual fraud prevention measures. As a result, they pay 66 per cent more than the high street for card services. The average credit card discount rate is 2.5 per cent online. The same average for traditional retailers is about 1.5 per cent.

Two thirds of the respondents said it took more than a month before a credit card crime was detected. Less than 10 per cent of internet thieves bother with a redirection service at the goods' delivery address and only 10 per cent make the effort to set up a false telephone account. In many cases, fraudsters simply hijack an innocent person's card details to buy goods on the internet.

The majority of internet fraudsters are getting away with it. Around 57 per cent of online traders say they have reported frauds to the police and over half encountered a lack of interest.

Only nine per cent of frauds reported to the police by online retailers currently lead to a prosecution, and if a merchant's chargeback rate remains too high, credit card companies can, and will, impose penalty fees and may ultimately close the internet merchant's account.

While only 11 per cent of respondents admitted that their site had been hacked into, 55 per cent of online traders said internet fraud was a growing problem for their organisation.



Nick Rosen is a director of The Online Research Agency. email: nick@online-agency. com or tel: 0797 1543703.