Online VARs have been urged to sharpen their review processes as research reveals that UK internet businesses are losing about two per cent of their revenue to fraud.
The UK Online Fraud Report, conducted by Vanson Bourne on behalf of payment services firm CyberSource, finds that firms are losing a yearly average of £400,000 to fraud and related costs. Akif Khan, CyberSource’s head of client and technical services, claimed the IT sector remains one of the hardest hit.
“IT goods continue to be top targets because they are so easy to resell,” he said. “The biggest problem for merchants is that the margins on the goods are so low.”
The report reveals almost three quarters of online firms still manually review some orders, with five per cent relying solely on doing so. SMEs manually check two thirds of online orders.
Khan expressed concern that 68 per cent of firms expect a spike in sales this year but only 16 per cent plan to add manual review resources. “Something’s got to give,” he said. “The key is how they are going to deal with that. One strategy is to reduce the number of reviews they do.
“A third of merchants accept some 90 per cent of manually reviewed orders. This suggests their automated tools are not optimised.”
International expansion further complicates online firms’ review processes, with well over half now accepting orders from mainland Europe and 49 per cent from the US. About a quarter of firms accept orders from China, Brazil and Mexico, respectively, with the figure set to rise to almost two in five next year.
“Transactions from other countries are not inherently more risky,” said Khan. “But you need to make sure the tools you have in place are applicable to the geographies you are taking the orders from, and that your manual review team has some knowledge of those areas.”
VAR Hemini trades online, and marketing manager Barry Dodhia revealed his firm has implemented a stringent automated process that flagged up as many as 60 per cent of orders. He claimed the system singled out “a high percentage of overseas orders, as well as some local ones”.
“We have raised our barriers from their initial level and do not take orders that give us the slightest uncomfortable feeling – we have raised our barriers very much from their initial level," he said. "We do not take any orders that give us the slightest uncomfortable feeling – we have been defrauded in the past."
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