Online Payment Fraud: The Grinch who stole eChristmas?

December 18, 2000

Abstract

Boston, MA, USA,  December 18, 2000

?  Report Published by Celent  

Online Payment Fraud to Cost e-Merchants US$300 million  this Holiday Season and Increase Rapidly

In a new report released by Celent Communications, entitled "Online Payment Fraud: The Grinch that Stole e-Christmas?," Celent examines the current level of fraud perpetrated at virtual storefronts in the US. Celent estimates that cyber merchants are experiencing fraud rates that are 30 times higher than their bricks-and-mortar counterparts. During this holiday season alone, online stores will loose $300 million to fraudulent transactions, equal to three percent of e-commerce sales.

"Today, merchants must absorb the large majority of these losses, a significant burden to merchants struggling to be profitable," comments Meredith Hickman, author of the report. "In the short term, we expect to see more and more retailers turn to score-based solutions to help detect fraudulent transactions. However, we expect to see credit card associations and member banks come to the rescue with a workable solution that reaches the critical mass within 3-5 years."

The report compares a host of fraud detection and protection solutions available on the market, including the failed SET initiative, new three domain (3D) initiatives, score-based models, smart cards, and biometrics. It also examines the likely evolution for combating online payment fraud. A Table of Contents is available online.

Members of Celent Communication's Retail Banking research services can download the report electronically by clicking on the icon to the left.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

 

Online Payment Fraud: The Grinch that Stole e-Christmas?

Return to report Abstract.

EXECUTIVE SUMMARY  3
INTRODUCTION  5
THE RESIDENTS OF WHOVILLE  6
  Consumers  6
  Merchants 6
  Banks and Credit Card Associations  8
ONLINE PAYMENT FRAUD IN WHOVILLE  10
COMBATTING THE GRINCH: FRAUD DETECTION AND PREVENTION SOLUTIONS  12
  Basic Merchant Anti-Fraud Solutions 12
  Advanced Merchant Anti-Fraud Solutions 13
  Digital Certificates and Signatures 14
  Set and Other Credit Card Association Schemes 14
  Biometrics 16
  Comparison of Solutions 17
FUTURE TRENDS 19
 
        

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