September 21, 2017

Fraud management now eats more than one fifth of e-commerce merchants’ operational costs

Chargebacks and false positive losses spike

PORTLAND, OR -- E-commerce merchants are investing record sums to combat fraud, according to “Exploring the Financial Impact of Fraud in a Digital World,” a new report published today by Vesta Corporation and Javelin Strategy & Research. For the third consecutive year, the organizations surveyed hundreds of e-commerce merchants to assess their fraud fighting costs and challenges.

Fraud now consumes 8 per cent of the average ecommerce merchant’s revenue stream and 9.7 per cent of revenue among merchants who sell only digital goods, like eBooks, eTickets and other instant download items. In fact, the average e-commerce merchant now devotes 21 per cent of its operational costs to fraud management.

“Merchants’ fraud costs continue to rise year over year,” said Al Pascual, Javelin research director. “While some merchants have experimented with new fraud fighting tools and tactics, on the whole, they haven’t been able to keep pace with dynamic fraudulent threats.”

Compared to 2016 data, chargeback losses—which occur when merchants end up footing the bill for legitimate consumer or fraudster purchases—increased by 60 per cent among digital goods merchants and 75 per cent among those merchants selling strictly physical goods. False positives—which occur when merchants mistakenly decline legitimate transactions—grew by 25 per cent among digital goods merchants and 27 per cent among physical goods merchants.

“The writing is on the wall,” explained Tom Byrnes, Vesta's chief marketing officer. “If merchants don’t modernize their fraud protocols, they won’t be focused on growth or innovation; they’ll be struggling to stay in business.”

To download a complimentary copy of the report, please visit http://bit.ly/2h5gvx2.

 

 

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