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BUSINESSES BETTER UNDERSTANDING ONLINE FRAUD

Posted on December 7, 2001

      Online credit card fraud continues to be a growing concern, and online merchants are taking more precautions than ever before, according to the 2001 Online Fraud Report.

      The survey, which was conducted by Mindwave Research and sponsored by CyberSource Corp., found that 65 percent of respondents are taking more precautions this year than last to prevent online fraud. Results also show that businesses selling online have a better understanding of who bears the financial risk when online fraud occurs -- the merchants themselves.

      Other results from Online Fraud Report include:
- 41 percent of merchants say the issue of online credit card fraud is "very serious" to their business.
- 57 percent cited loss of revenue as most significant negative business impact related to fraud, followed closely by loss of staff time and loss of customer goodwill.
- 73 percent cited inability to accurately detect fraud as key concern.

      Consumers reported losses totaling $4.3 million, or $636 per person in Internet fraud to the National Consumers League's (NCL) Internet Fraud Watch during the first 10 months of 2001, up from $3.3 million and $427 per person for all of 2000.

      "Increases in loss coupled with predictions of less travel and more online shopping this holiday season make it more important than ever for consumers to understand how to avoid online scams and shopping mishaps," said Susan Grant, director of the NCL's Internet Fraud Watch.

      Though consumers are using their credit cards more often online, money orders are still the most common way Internet fraud victims paid for their products or services.

      "Credit cards are the safest way to pay because you can dispute the charges if something goes wrong," Grant said. "And new technologies like substitute or single-use credit card numbers add an extra measure of protection against someone else fraudulently using your account."

      Online auction sales remained the No. 1 Internet fraud for the first 10 months of 2001, though decreasing from 78 percent of the frauds reported to the IFW in 2000 to 63 percent in 2001. Other top frauds for 2001, in order, are nonauction sales of general merchandise, those annoying Nigerian money offers, Internet access services, Internet adult services, computer equipment/software, work-at-home plans, advance fee loans, credit card issuing and business opportunities.

      "While auction complaints are the most numerous, consumers lose more money in some of the other top 10 Internet frauds, such as general merchandise and computer hardware or software purchases," Grant said. Consumers lost an average of $845 per person to general merchandise sales (anything from jewelry to T-shirts that were not purchased on an online auction) and $1,102 to online purchases of computer equipment or software. The average loss per consumer to online auction sales was $478.

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