Report: Fraud Efforts are Earnest but Merchants Missing Opportunities

Oct. 15, 2012

Sixty-five percent of merchants are employing active authentication technologies including Verified by Visa and MasterCard SecureCode to fight fraud, but far fewer are employing a comprehensive fraud-fighting strategy that will reduce their reliance on expensive manual review, according to a new report from and SignatureLink.

Fraud Report Friendly fraud continues to be an issue for online retailers, The SignatureLink SecureBuy 2012 CNP Fraud Study found. Overall, 66.5 percent of merchants reported friendly fraud was in the very low range (0-5 percent of fraudulent orders classified as friendly fraud), but for online merchants, only 53.4 percent could say their friendly fraud rate was at the very lowest range.

Greg Wooten, CEO of SignatureLink, said the survey showed chargeback prevention and management is the best area for e-commerce merchants to direct anti-fraud efforts. He noted that the study found only 10 percent of merchants collect the buyer’s consent to their terms and conditions and refund policies through voice or signed consent. Fifty percent require only that the customer check a box during the online checkout process, and 40 percent of merchants never require the buyer to consent to anything at all.

“That in itself is a problem,” said Steven Casco, founder and president of, “because our study also found that more than 60 percent of merchants never have the buyer’s signature on file for any transaction, and over half of merchants lose the chargeback representment process almost every time.”

The report’s authors concluded that merchants are using many of the tools they have available to them, but the tools they are using and the way they are mixing and matching them can be counterproductive. Active techniques, they said, are abrasive and target legitimate customers along with fraudsters.

“We applaud the many merchants using active authentication techniques,” Wooten stated, “but the user experience could be improved among legitimate customers by deploying risk-based passive authentication to invoke active authentication.”

More than 375 merchants participated in the online survey distributed in August and September. A copy of the report is available for download here .