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Entertainment companies providing cable, satellite, and pay-television services experience the highest rates of global fraud, says 2Checkout Inc., an e-commerce payment-services company, in its inaugural Fraud Index report.
The index is based on transaction data made via more than 600 million devices that connect to 2Checkout’s payment service. Columbus, Ohio-based 2Checkout says more than 50,000 merchants use its service.
Men’s and women’s clothing stores and sports and riding apparel round out the top three merchant types.
The index also examines payment types, fraud by value of transaction, and location-based fraud. For the report, 2Checkout sets the average fraud rate worldwide to 100. An index of 200 is considered twice as risky as the average.
For cable, satellite, and other pay television providers the fraud index is -324, indicated the risk is more than three times the average.
This type of information could help e-commerce retailers understand where fraud might come from so they can adjust their payment systems to prevent potentially fraudulent transactions. Online retailers also do not want rules that unduly block valid transactions, potentially preventing sales.
“Presumably, everyone wants to sell more but only if they can do that in a profitable manner,” says Daniel Greenberg, acting chief marketing officer at 2Checkout. With poorly set fraud-prevention rules, retailers also could have other issues. “They could suffer high chargeback rates, which could jeopardize their ability to offer some payment methods,” he says.
The index also could help merchants evaluate new product categories or geographic locations to sell to, he says. “The more armed merchants are with information, the more they’ll flourish,” Greenberg says.
That might be data such as higher-priced goods attract higher fraud rates. 2Checkout found that transactions with value of more than $400 had fraud rates 35% higher than average.
Merchants considering selling in Indonesia, Pakistan, or Romania might want to pay more attention to their fraud-mitigation efforts. According to the 2Checkout Fraud Index, Indonesian buyers are 12 times more likely to commit fraud than buyers from other countries, with a fraud index of -1276. The U.S. fraud index is -5. Guatemala, with an index of 89, is least risky. This is based on the buyer’s billing address.
When measured by the buyer’s Internet protocol address, which indicates where a computer connected to the Internet is located, Indonesia, Pakistan, and Romania harbor the highest fraud. The least fraudulent is Belgium, with an index of 82. The United State has an index of 34.
2Checkout says each transaction is evaluated against more than 300 business rules, such as if multiple card numbers are coming from the same device or data is entered faster than human averages, Greenberg says.
