e-commerce fraud will cost US $500 million

Online retailers in the US expect to lose about $500 million to fraud and suspect transactions over the Christmas period, according to a survey by Gartner.

The analysts estimated $160 million will be lost to fraud and approximately $315 million will be lost in sales due to suspect transactions.

As business websites move to weed out fraudulent transactions, six per cent of sales will be rejected, representing a potential $950 million in revenue in the fourth quarter of 2002, the survey found.

Online US retailers are also likely to mistakenly reject about two per cent of total sales due to unfounded suspicions and therefore lose about $315 million in potential sales. Fraud will cost e-tailers a further $160 million before the end of the year.

Avivah Litan, Research Director for Gartner, said: "e-tailers report that fraud attacks are becoming more sophisticated, frequent, and menacing in nature. Despite efforts to curb online fraud, the rate of fraud has stayed constant at one per cent since mid-2000."

In the UK, Patricia Hewitt, then Minister for e-commerce, called for innovative ideas to tackle e-commerce fraud in the UK retail sector in 1999.

She said: "Fraud costs the UK upwards of £9 billion every year. We need to address the problems of fraud and breach of security in e-commerce and establish an environment of trust and security in electronic business to meet our target of making the UK the best place in the world to do business electronically by 2002."

Prime Minister, Tony Blair, told delegates at last month's e-summit in London that the UK had attained second position in the global e-commerce market, behind the US.

Research published by the Department of Trade and Industry and MORI recently showed UK consumers' willingness to embrace online shopping continued to be marred by issues surrounding credit card fraud.

Other concerns included having to give the company personal information and the company not being genuine.

A DTI spokesperson commented: "Existing consumer protection legislation applies online and, as such, the 'Distance Selling Regulations' give consumers extra rights when buying sale of goods or services concluded by e-commerce. Also, if you buy by credit card and the goods fail to arrive or are faulty, the card company should refund you for any single item costing over £100."