Merchant Risk Council’s Platinum Day – Morning Sessions

by Allen Weinberg on March 10, 2009

in Allen Weinberg, Conferences & Meetings, Ecommerce Payments, Merchant Risk Council

Allen Weinberg

I‘m in Las Vegas today attending the Merchant Risk Council’s Platinum Day Sessions. I’ll be blogging my comments from the sessions here along with my colleague Jay DeWitt who’s also attending this year’s MRC.

Fraud Prevention on eBay Marketplace

Unfortunately my plane landed such that I was only able to catch the tail end of the session. Session was conducted by Tong Li, John Canfield, and Stoney Burke from eBay. An interesting point that came up during the Q&A concerned user authentication – Tony mentioned that while certainly not foolproof, he thinks we’ll see more and more out of band authentication.

CyberSource 2008 Fraud Survey

Perry Dembner and Doug Schwegman from CyberSource presented some new data/analytics from the latest Annual Fraud Survey (IMHO, this year’s study was definitely the best yet!). CyberSource traditionally does some custom analytics specifically for the MRC Platinum members, using data just from that group.

Lots of new questions this year, getting more granular to distinguish between tools used for automatic screening vs. manual review, staff training and turnover, and other metrics associated with manual review. Based on data from the MRC Platinum members (who average over $25 million/year in annual online sales), fraud appears to have increased this year as a percent of revenue.

Some of the increase may be due to the increase in sample size, as well as the fact that newer and perhaps less sophisticated merchants have been joining the MRC Platinum group and participating in the survey. If you’d like specifics on the actual data, Perry Dembner at CyberSource would be glad to take your phone call!

One of the key data points that I always loved about the CyberSource report is the notion that for most merchants, all fraud does not necessarily show up in the official chargeback rates. Rather that volume shows up as customer credits that don’t flow back through the card systems (this really answers the question as to how online merchants can report over 1% fraud and not get shut down by the card systems).

The survey found consistent results from last year re: those merchants that challenge/represent as much as possible, vs. those that challenge very few. Also depends a lot on what type of goods are being sold – e.g., digital vs. hard goods. Digital goods merchants tend to challenge 1 out of 5 while physical goods merchants tend to challenge three times that amount.

MRC group has tended to lag the market as a whole in adopting Verified by Visa and MasterCard SecureCode.

The MRC group has a much lower order rejection rate than the study group as a whole, and significantly better performance in 2008 for international orders (lower reject rates, lower fraud rates). Last year group rejected 15% of orders outside the US and Canada due to suspicion of fraud, now down to 6%. Especially interesting since on a system wide basis, international fraud rates have been going up each year on a consistent basis.

Other interesting tidbits – MRC Platinum merchants:

  • Use 2X-3X more tools than the merchant community as a whole
  • While reviewing a smaller percentage of orders manually, much higher utilization of manual review tools (third party databases, phone calls, etc)
  • Have higher staff productivity
  • Tend to have a higher mix of new staff (function of growth? Turnover?)
  • Feel it takes twice as long to “season” a new staff member

More from the MRC in Las Vegas after lunch!

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