As online credit card fraud rises, so do merchants' prevention costs

DENVER BUSINESS JOURNAL - Criminals are increasingly doing their crooked shopping online as chip readers become more common at brick-and-mortar stores.

Online credit card fraud is costing online merchants more than 7.5 percent of their annual revenue, according to a survey released Tuesday by Javelin Strategy & Research, a consulting firm that specializes in the payments industry. The costs merchants incur include fraud management services, false positives and chargeback losses.

Digital goods merchants, the types of sellers who enable videogame and music downloads, saw the worst losses this year, at 8.6 percent of revenue on average. Hybrid goods merchants — ones that sell both digital and physical items — witnessed similar costs, at 8.1 percent of revenue. The majority of the costs were driven by fraud management expenditures, accounting for around 75 percent of costs.

Fraud is particularly expensive for online merchants who must pay the cost of dishonest transactions. Even false reports of fraud cost merchants extra — about 30 percent of all transactions that are declined due to suspected fraud are believed to be legitimate.

Read more at the Denver Business Journal: http://bit.ly/2dXW416

(© 2016 American City Business Journals. All rights reserved.)


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