8.9 NetFraud


8.9 NetFraud

In the situation of auction fraud, the individual bidder is left holding the bag. However, in the case where an e-business accepts a credit card and ships the goods out, it is the merchant that will be left to deal with the loss. Typically, e-retailers can expect that a certain percentage of their daily on-line sales are fraudulent. With already razor-thin margins, this is a very critical problem for on-line merchants. As e-commerce becomes more prevalent, there has been an increase in the use of credit-cards payments, from 11% in 2000 to 28% in 2001 and a parallel increase in fraud (see Table 8.2).

Table 8.2: Top Three Payment Methods

2000

2001

Money Order

43%

Money Order

29%

Check

30%

Credit Card

28%

Credit Card

11%

Check

18%

In fact, this is a far larger problem for e-retailers than they are willing to admit. A popular seller of electronic products, for example, which on average makes about 6,000 sales a day, acknowledges that about 1,000 of those sales were made using stolen credit cards or fraudulent numbers. This popular e-retailer admits the amount of fraud can range from 14% to 20%, depending on the type of product being purchased.

This is further reflected in the statistics reported by fraud.org, which found that overall losses for 2001 were $4,371,724, up from $3,387,530 in 2000. The average loss per person also was on the increase from $427 in 2000 to $636 in 2001. There are significant differences in the per-person averages for each product category, with hardware and software being especially high targets of fraud (see Table 8.3).

Table 8.3: Fraud Statistics Reported by fraud.org

Top Fraud Product Targets

Average Loss Per Person

Computer equipment/software

$1,102

General merchandise sales

$845

Internet access services

$568

On-line auctions

$478

Information adult services

$234

Of course, hardware as well as other high-end electronic equipment is fairly easy for criminals to sell via auction sites. Compounding the problem for e-businesses is that because there are no shopper signatures with these fraudulent on-line transactions, they must absorb the bulk of the monetary deficit. The e-businesses are stuck with the entire loss because the credit-card companies only extend the $50 protection limit to the consumer cardholders and not to merchants.




Investigative Data Mining for Security and Criminal Detection
Investigative Data Mining for Security and Criminal Detection
ISBN: 0750676132
EAN: 2147483647
Year: 2005
Pages: 232
Authors: Jesus Mena

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