Online Fraud Same as in the Real World

April 18, 2006

The Merchant Risk Council (MRC) is reporting that online fraud rates for merchants in its study are decreasing and are approaching the fraud rates experienced in "card-present" brick-and-mortar retail environments. The association does a yearly survey of online merchants and says fraud rates have been dropping although they are still a concern. 48% of the retailers surveyed said that their fraudulent chargeback rates were less than 0.1%.

Today's announcement from the council quotes co-chair Julie Fergerson commenting on one important security concern: "As fraud prevention tools gain widespread use, their effectiveness declines, and fraudsters are always looking for ways to 'beat the system.'"

The survey found that the use of Address Verification Systems (AVS) rose from 70% to 83% since 2001 but their effectiveness at preventing fraud actually declined from 70% to 25%. Card Verification Codes (CVC) also dropped in effectiveness, though not as dramatically. Use of CVC increased from 38% to 73% since 2001 but the effectiveness of this measure dropped from 49% to 31%.

This confirms the saying I've used in the past about security: 'We build a higher wall and the bad guys build a taller ladder.' Security is a process of continual escalation as data thieves develop greater sophistication.

AB -- 4/18/06