Holiday shoppers hoping to save time purchasing gifts online this year might
want to double check their ZIP codes before placing any orders.
A recent study released by CyberSource
who do business on the Internet are hesitant
to deal with customers located in certain “hot zones” in the United States and
around the world, where online fraud is prevalent and the chance to get burned
According to the survey of 348 retailers, New York is the riskiest North American city for e-commerce,
and Nigeria received the dubious distinction of having the
worst reputation for online fraud in the world. These are areas where merchants experienced a high percentage
of purchases with stolen credit cards or through identity theft.
“There are certainly places where selling online is a greater risk than in
other places,” Doug Schwegman, director of market intelligence at CyberSource,
New York City’s 26 percent leads Miami, which came in at 10 percent; Los Angeles
at 9 percent; Chicago and Detroit at 3 percent each; and
San Francisco at 2 percent.
Overseas, 31 percent of the retailers chose Nigeria as the riskiest
place to do business, followed by Indonesia with 8 percent; Russia with 6 percent;
China with 5 percent; and the United Kingdom and Afghanistan both with 4 percent.
Although fraud has hurt online retailers more than ever this year, residents
of these high-profile fraud regions may ultimately pay the price for their area’s
reputation, according to Schwegman.
If an online merchant recognizes a customer’s ZIP code as being in a hot zone,
they can require additional steps to verify identification, such as asking the
purchaser to make a telephone call to verify the order. Some merchants flag orders
from high fraud areas for manual processing, Schwegman said. In some cases,
smaller businesses will reject orders from the region, especially during the
“It definitely can slow business down if you have to manually verify every
order that comes in,” Schwegman said. “It’s not fair, but if merchants have
gotten routinely burned by orders from one ZIP code, it’s understandable that
they will just take longer, harder looks at orders from that location.”
One reason for the concentration of electronic fraud in distinct areas of
the country may be the availability of trans-shippers in those regions, said
“Fraudsters located in Nigeria, Indonesia or some parts of Eastern Europe
now know their orders are going to be denied,” according to Schwegman. “There
is just too much history of fraud from those parts of the world. So they order
to a domestic address where someone will accept the package and forward it to
the real location abroad.”