Midsize Merchants in Most Danger From False Positives: Report

The rate at which North American companies rejected e-commerce orders due to fraud remained largely unchanged from 2016 (2.9 percent this year compared to 2.8 percent last year), according to a recent report. Underneath that unchanged rate, however, lies the problem of false positives—orders rejected by a company due to suspicion of fraud but that are actually legitimate—which are a rapidly increasing concern to e-commerce merchants. Not only are they difficult to track, their impact may not be confined only to the single lost sale. It’s possible a loyal customer confronted with a decline, could turn to a competitor. The recently released  CyberSource annual online fraud benchmarking report found 68 percent of those polled said they try to track false positives and that those merchants believe up to 10 percent of their rejected orders are legitimate.

If higher overall rejection rates lead to more false positives—a reasonable inference—then midsize merchants are the ones that most need to identify them. According to the CyberSource research, merchants with revenue between $25 million and $100 million reject the most orders (3.7 percent). Small merchants with revenue of less than $5 million reject 2.5 percent of their orders, while businesses with $5 million to $25 million have a rejection rate of 3.1 percent. Enterprise companies with annual digital commerce revenue in excess of $100 million reject 2.9 percent of e-commerce orders for suspicion of fraud.