The number of fraud attempts in European online trade has declined slightly, as reported in the E-commerce Report 2010 by Deutsche Card Services, which analyses purchasing and payment behaviour as well as non-payment risks on the basis of real-life transactions.
In case of the most popular e-commerce payment method – the credit card – fewer chargebacks after a cardholder complaint were caused by fraud attempts. This is evident from the fact that the share of chargebacks on the grounds that the purchase was not authorised by the cardholder or that the card was not presented fell by 7 percentage points.
In contrast, the number of chargebacks stemming from logistical and formal failures during the transaction has increased. At 0.34%, the chargeback ratio is still low. It is palpably below the current shoplifting ratio in stationary business (0.5%), which was determined by the EHI Retail Institute, a scientific institute for the retail industry.
More instances of improper use of credit and Maestro cards
The Deutsche Card Services study found that the improper use of cards is the main reason for transaction rejections. Successful card transactions increasingly fail because the card is no longer valid or because the necessary information about the card’s validity is lacking.
Non-payment risk higher for men
The non-payment risk is higher for men than for women if card payments or direct debits are used. While the difference between the sexes amounts to only 0.04% for the chargeback ratio, it rises to 1.217% for direct debit chargebacks. Interestingly, the MasterCard chargeback ratio is 0.07% higher than the Visa ratio if men have made the purchase in question. In contrast, the ratios for women are virtually identical.
Higher non-payment risk in UK shops
The non-payment risk is higher for both UK shops and British customers and is above the European average. One reason why British merchants are attractive to international customers is that there is no language barrier. Unfortunately, that encourages online fraudsters, too. The report shows that using the 3-D Secure security technology helps: the non-payment risk declines to 0.12% if online merchants use 3-D Secure.
Chargeback ratio declines further
The further, slight decline in the chargeback ratio (to 2.735%) went hand-in-hand with an overall decline in the importance of direct debits in e-commerce. The main reason is that fewer direct debits were rejected by the credit institutions on the grounds of insufficient funds on the accountholder’s account. According to Deutsche Card Services, the share dropped from 71.41% to 66.28%. Encouragingly, fewer expensive direct debit chargebacks occurred due to differing or wrong account numbers or accountholder names or on the grounds that the account was a savings account. Direct debits from a savings account are not possible.
Higher transaction values almost always result in higher non-payment risks
The equation ‘higher transaction value equals higher non-payment risk’ applies to all card payments in e-commerce and, with one exception, to direct debits.
According to the study, the direct debit chargeback ratio is highest for the transaction value category of €100 – €500 (3.348%). Weekend trips, for example, often belong to this category. The direct debit chargeback ratio drops to 1.370% for luxury goods worth more than €500.
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