E-commerce payment risk declines in Europe

The payment risk involved in e-commerce is declining in Europe, especially for high-value orders. That is one of the outcomes of the fourth annual report on online payments by Germany-based payment processor Deutsche Card Services GmbH, part of the Deutsche Bank Group.

The overall chargeback rate declined 29% to 0.1725% in the period October 2008 to September 2009, compared with 2.431% in the previous 12-month period, the payment processor says in its recently released “E-Retail Report 2010.”

For credit cards, the rate of chargebacks—in which the merchant has to reverse the charge, usually as a result of fraud—declined to 0.1732% from 0.2470%. For Maestro, the leading debit brand in Europe, the decline was from 0.536% to 0.1312%.

Large decrease in chargebacks for luxury goods
Particularly dramatic was the decrease in chargebacks on transactions above 500 euros (US$714). That rate declined to 0.7632% from 1.4573% the previous year, good news for online sellers of luxury goods.

3-D Secure
One reason for the reduced fraud risk, the report says, is the growing adoption in Europe of security methods known as 3-D Secure promoted by the major card brands under the names Verified by Visa and MasterCard SecureCode. The chargeback ratio on transactions that use that security method—which requires the cardholder to authenticate himself with a previously selected password—was only 0.0652% compared with 0.1908% when the cardholder did not authenticate himself with a 3-D Secure method.

The report is based on an analysis of 7.5 million e-commerce transactions processed by Deutsche Card Services.

Source: Internet Retailer