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UK online merchants expect continued growth in 2012

UK online merchants expect continued growth in 2012
Wednesday January 25 2012

This is according to the eighth annual UK Online Fraud Report, an independent survey undertaken by CyberSource

Digital goods businesses are growing particularly strongly; those anticipating growth in 2012 are forecasting an average 33% increase in online revenues.

In all, 73% of merchants expect online revenue growth in 2012 whilst 24% forecast no change. Amongst those expecting to grow, smaller businesses (annual online revenue less than £500,000) are the most optimistic, with ambitious plans for 35% growth on average. The largest businesses (those greater than £25m annual online revenue) are more conservative, forecasting an increase of 18%.

“The mobile channel presents a real opportunity for merchants,” said Dr Akif Khan, co-author of the report and Director, Products and Services, CyberSource EMEA. “38% of merchants now have a dedicated mobile website and 26% have their own app. But just a quarter of those merchants are tracking fraud originating on their mobile site and only 16% are tracking fraud through their mobile apps. With interfaces often streamlined to make mobile commerce simpler for the user, the fraud risks on mobile channels are different and still need to be properly understood. If fraud costs are to be managed efficiently across multiple channels in 2012, each should be measured and configured individually.”

The impact of fraud varies by sector, showing the diversity of UK online merchants. For the travel and services sectors, the biggest concern is sheer revenue loss. 51% of travel and 46% of services vendors selected revenue loss as the greatest fraud concern. For physical goods retailers the challenge is different: 50% say their greatest concern is inadvertently turning away good orders. For digital goods businesses the main challenge is the cost of manually reviewing too many orders (41%).

Since the 2009 survey, the percentage of merchants using manual review has fallen by 10%, with 61% of merchants reporting that they engaged in manual review in 2011. The practice remains most common in small businesses where one fifth of respondents review almost every order. Very large merchants are the most efficient users of manual review, examining only 11% of orders on average.

Manual order review rates are fairly consistent across business sectors with each just a few percent either side of the average rate of 22%. However, manual review remains inefficient: merchants ultimately accept 75% of the orders that they review. These results suggest merchants should devote increased attention to improving their automated order screening procedures to increase detection accuracy and lower the need for manual review.