Study: Fraud No Threat to E-Commerce

Despite widespread public concern over Internet fraud, shopping on the Internet is a secure way for both individuals and businesses to conduct business, according to a study released Tuesday by ActivMedia Research LLC.

The study, "Real Numbers Behind E-Transactions, Fraud & Security," suggests that while businesses and their Webmasters must be vigilant about preventing fraud, the fact is that selling goods and services over the Internet is apparently just as safe -- or slightly safer -- than selling in brick-and-mortar establishments.

Little Damage to Companies

According to the study, 97 percent of companies surveyed said that fraud is either "not a problem" at their Web sites, or that it occurs "with minimal impact on business."

Just 2 percent of e-commerce operations surveyed said that fraud is "somewhat of a problem," and only 1 percent considered it a substantial problem.

Furthermore, when looking at the amount of actual losses reported, the study found that on average, companies lost 1.23 percent of their revenue to fraud committed via e-commerce, while offline sales resulted in losses of 1.5 percent. The difference between the percentages is not statistically significant.

Of those reporting losses due to online fraud, 96 percent reported that they lost 5 percent or less of revenue due to malfeasance.

"Online shopping gets a bad rap in the press, but most of the stories reported are anecdotal tales of companies that haven't put successful defensive measures in place," said Harry Wolhandler, ActivMedia's Vice President of Market Research. "Fraud control is clearly possible online."

According to ActivMedia Vice President of Information Services Chris Anne Wheeler, "If you let anyone and everyone order your products online without doing anything to verify addresses and credit card numbers, it's your own fault if you get taken."

Consumers Are the Real Victims

Of course, the study results mean little if consumers are not confident that they are protected when buying online. As reported, concerns about fraud and privacy on the Internet are widespread among the general public -- and not wholly without reason.

"If you look at the reality as presented in this study, businesses aren't the one getting bilked here," Wheeler told the E-Commerce Times.

According to Wheeler, consumers are the real victims of shady dealing, especially with the abuses common at online auctions. Wheeler said, "When people go to auction sites to try and get the best deals possible, this is where most of the fraud occurs."

A subtext of the study is that consumers must take steps to increase their level of security when shopping online.

"Consumers really need to make sure that it is a legitimate business that's handling their transaction -- and that's easy to tell," Wheeler said. "You can tell by the security lock, or if you wind up at a secure site when you give your credit card number."

About the Study

In conducting the "Real Numbers" study, ActivMedia Research surveyed 1,019 businesses that sell products both online and offline.

The Peterborough, New Hampshire-based research firm, a division of ActivMedia, Inc., specializes in studying e-commerce trends among Web executives and managers.