For Internet retailers, fraud represents perhaps the most significant and growing cost for merchants regardless of their size. CyberSource, an eCommerce payment management solution, has released their ninth annual online fraud report and the findings are, well, frightening and discouraging to say the least.

From the overview: Over the past few years the percent of online revenues lost to payment fraud has been slowly declining from 1.8% in 2004 to 1.4% this year. However, total losses from online payment fraud in the U.S. and Canada have steadily increased during this time as eCommerce has continued to grow 20% or more each year.1 In 2007, we estimate that $3.6 billion in online revenues will be lost to online fraud — up from $3.1 billion in 2006.

Findings of the report include:

- The overall average fraudulent order rate (the percent of accepted orders later found fraudulent) was 1.3% vs. 1.1% in 2006.
- Chargebacks understate fraud loss by as much as 50%
- International order risk 2 ½ times higher than domestic orders
- Manual review rates increased from an average of 23% of orders in 2006 to 27%.
- Efficiency gains (e.g. primarily in manual review) of as much as 20% may be required.