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ClearCommerce Corporation, a provider
of payment processing and fraud protection software
for e-commerce, studied 1,100 of its best online merchants
to get a better understanding of online fraud. In doing
so, they analyzed 6 million transactions from 40,000
customers who were collectively doing business with
the company’s merchants.
ClearCommerce’s white paper on fraud
prevention states that "fraud rates for orders
with IP addresses from certain countries outside
the U.S. are more than 10 times the typical rate from
US orders. In addition, 21 percent of fraudulent
orders can be identified by inconsistencies between
the consumer’s IP address and their reported billing,
shipping or card issuer countries."
Many experts feel that last year’s
figures will be even higher due to the activities of
organized crime taking a larger role in online fraud.
Some officials from top US intelligence agencies also
believe that terrorists are stealing credit cards to
help fund their organizations. To sum up the seriousness
of the online fraud, Gartner Inc., one of the major
online information researchers, reported that loss because
online fraud/identity theft accounts for USD$700 million
dollars. This is 19 times that of offline fraud for
the same period of time. This loss accounts for 1.14
percent of the total online sales for 2002 (USD$61.8
billion).
Additionally, it is not only the actual
fraud but the perception of fraud which takes a toll
on the bottom line of an ecommerce business. One of
the high-powered analysts for Gartner said, "Merchants
were rejecting around 5 percent of Internet transactions,
on average, as ‘suspicious,’ and at large
retailers that sell more than 25 percent of their goods
and services online, the figure was up 7%."
The number of frauds vary by country.
Below is a breakdown of the countries from where the
most fraud originates as well as the least. According
to ClearCommerce, approximately 6% of all online transactions
from such countries as Malaysia and Israel (who are
actually on the bottom of the dirty dozen show below)
are fraudulent.
| Countries
from where the most online fraud originate. |
Countries
from where the least online fraud originate. |
When
the fraud is perpetrated from within the US, these
are the states with the largest percentage of fraudulent
people. |
1)
Ukraine
2) Indonesia
3) Yugoslavia
4) Lithuania
5) Egypt
6) Romania
7) Bulgaria
8) Turkey
9) Russia
10) Pakistan
11) Malaysia
12) Israel |
1)
Austria
2) New Zealand
3) Taiwan
4) Norway
5) Spain
6) Japan
7) Switzerland
8) South Africa
9) Hong Kong
10) United Kingdom
11) France
12) Australia
13) United States |
1)
California - 21%
2) Florida - 10.1%
3) New York - 8.3%
4) Texas - 6.0%
5) Penn. - 4.5%
6) Illinois - 3.9%
7) New Jersey - 3.7%
8) Michigan - 2.8%
9) North Car. - 2.6%
10) Virginia - 2.5% |
Top
Internet Frauds
| Jan.-Oct.
2001 Top 10 Frauds |
Percentage
of total fraud |
Average
Loss per person |
| Online
Auctions |
63% |
$478 |
| General
Merchandise Sales |
11% |
$845 |
| Nigerian
Money Offers |
9% |
$6,542 |
| Internet
Access Services |
3% |
$568 |
| Information
Adult Services |
3% |
$234 |
| Computer
Equipment/Software |
2% |
$1,102 |
| Work-At-Home |
2% |
$120 |
| Advance
Fee Loans |
1% |
No
Data |
| Credit
Card Issuance |
0.6% |
No
Data |
| Business
Opport/franchises |
0.4% |
No
Data |
Source:
Internet Fraud Watch
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