Unless e-crime is taken seriously the problem will not be resolved

Despite the rate of growth of online crime there is still a surprising lack of engagement with the problem from the retail industry and other parties affected by the issue, according to payments provider PayPal.

By Glynn Davis

Speaking at The Retail Bulletin's recent Retail Loss Prevention Summit Garreth Griffith, head of risk management in the UK and Ireland for PayPal, suggests: "There is generally a lack of awareness and response to e-crime – from governments to companies to managing directors and consumers."

Although a recent survey from Forrester found that 41 per cent of its panel of respondents intended to implement more tools to help prevent e-crime in 2009, a worrying 18 per cent were planning to do nothing to avert the problem. And of most concern, a hefty 94 per cent did not intend to increase their budgets to combat fraud even though such crime is a growing problem.

Proof of this comes from Forrester, which found 40 per cent of the panel had seen increases in fraud over the previous 12 months – which equated to 0.6 per cent of sales for business-to-business operators and a sizeable 1.24 per cent of revenue for consumer-facing companies such as retailers.

The growth in e-crime is being fuelled by a number of factors, with Griffith highlighting drivers such as the emergence of mechanisms for interaction on social networking sites, the continued evolution of phishing, the globalisation of e- crime, and the ease of access to potential victims.

For the eBay-owned PayPal, Griffith says the losses from criminal activity typically hit the company in two areas. Firstly, there is fraud loss such as stolen financials, ID theft, and non-existent items including customers receiving goods that are 'not as described' by the seller on the website.

Secondly, there is credit risk where PayPal has extended credit to merchants who then go bankrupt. This is an issue as PayPal has a strong policy of resolving problems with payments. Griffith cites the example of the cancellation of the Michael Jackson concerts that has left PayPal "holding the can" if sellers are not intending to give refunds to buyers.

For PayPal the resolving of issues over payments is absolutely vital and Griffith suggests it marks out the successful operators: "Apart from Amazon there are few companies that have focused on this. Resolution of problems and protection of customers are important to us and people are likely to get their money back if there's a problem."

glynnd@theretailbulletin.com