Reports Show Merchants Struggle to Balance Fraud Prevention and Sales Conversion
Card Not Present channel Merchants cite order rejection rates of nearly 3 percent for domestic transactions and nearly 7 percent for international orders. Meanwhile more than half of merchants depend on AVS and CVV checks, considering them to be effective fraud tools. While most merchants measure fraud rates and order rejection rates, far fewer take the next step to understand false positives.
According to the Merchant Risk Council (MRC) 2017 Global Fraud Survey, eCommerce merchants declined 2.6 percent of all orders for suspected fraud, and 3.1 percent of orders over $100. CyberSource found higher order rejection rates in their 2017 Fraud Benchmark Study: 2.9 percent for domestic orders and 6.8 percent for international ones. While merchants are declining 3 percent of more of their orders, not all of these are actually fraud attempts.
False positives, or sales insults, refer to when a legitimate transaction is declined for suspected fraud, and these are prevalent in the CNP channel. Measuring false positives can be difficult, as many consumers who were rejected never come back. False positive rates are difficult for merchants to measure, but industry surveys and reports indicate they may be a bigger problem than some merchants think.
To help better understand how merchants balance risk management and sales conversion, as well as what they are doing to reduce order rejection rates and measure false positives, The Fraud Practice and Kount have launched a new survey on False Positives.
Take the Survey Today – All who do will be entered in a chance to win one of five $250 MasterCard gift cards.
Also according to the 2017 CyberSource Fraud Benchmark Survey, 58 percent of merchants consider AVS (Address Verification Services) and 53 percent consider CVV/CSC (Card Verification Value / Card Security Code) checks to be one of their top three most effective tools for fraud prevention.
The 2018 Mobile Payments and Fraud Survey found that AVS and CVV/CSC checks are the top two most used tools for fraud prevention in the mobile channel. Whether applied in the traditional eCommerce or mobile channel, these checks are often circumvented by fraudsters who’ve stolen this information anyway, while merchants with strict policy rules around forcing AVS and CVV full matches can turn away many good orders.
Balancing sales conversion and fraud prevention is a difficulty for many in the mobile channel. The 2018 Mobile Payments and Fraud Survey from Kount, Braintree and The Fraud Practice also found that the most common challenges cited by merchants doing business in the mobile channel are maintaining ease of use for the customer (60 percent) and detecting fraudulent orders (52 percent). Nearly 60 percent of merchants surveyed reported mobile checkout abandonment rates of more than 20 percent.