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October 17, 2012

Retailers Fighting Online Fraud the Wrong Way

By Oliver VanDervoort, Contributing Writer

A new survey by two Internet research firms, SignatureLink and, shows that retailers are falling short when trying to battle digital fraud, or eFraud.

As the Internet becomes a place where almost everyone is doing business, the threat of fraud and identity theft only grows. While there’s a number of different ways for people to protect themselves from fraud, retailers understand that it is in their best interest to take action as well. 

The problem that arises when trying to fight this kind of crime, however, is that criminals can update their methods far more quickly than those who are trying to defend against them. Protection is mostly a reactionary defense and certain methods can only be crafted after an attack has been launched. 

The SignatureLink SecureBuy 2012 CNP Fraud Study surveyed more than 370 merchants, both online and off, and of all sizes about their attempts to protect themselves from fraud. The most surprising part for the two companies carrying out the survey is just how aware of fraud the retailers were.

The companies thought they would find that retailers were simply ignoring fraud and having to do chargebacks as simply the way things are done on the Internet. In the end, the survey found that as much as 65 percent of retailers were aware of fraud and were actively trying to combat that fraud. 

Image via Shutterstock

Active verification systems like Verified by Visa and MasterCard (News - Alert) SecureCode have been employed by many retailers, but to no avail.

“We applaud the many merchants using active authentication techniques,” SignatureLink CEO Greg Wooten said in a recent statement. “But the user experience could be improved among legitimate customers by deploying risk-based passive authentication to invoke active authentication.”

The survey also showed that companies have attempted to fight back against fraud by using systems that verify IP address as a way to show that the people who make purchases are who they say they are. A full 52 percent of retailers engage in these kinds of programs, but fraudulent purchasers have long found a way to doctor their IP addresses. 

In the end, retailers will have to take more aggressive and more finely tuned action when it comes to fighting fraudulent purchases.

Edited by Braden Becker
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