O-STA

Credit Card Fraud Threatens Online Merchants; Pago Report 2005: Manipulated Credit Card Data Rising in E-Commerce

COLOGNE, Germany--(BUSINESS WIRE)--June 16, 2005--Pago, one of the leading international Acquiring & Payment Service Providers, reveals in its Pago Report 2005 that credit card fraud is a growing threat to businesses selling goods or services through the internet. Online merchants are at risk whether they like it or not because they have to offer their clients payment by credit card if they don't want to lose customers. In cases where fraudsters use stolen or manipulated credit card data the merchant loses money because of so-called "chargebacks".

"A chargeback is generated if a credit card holder objects to an item on his monthly credit card statement", says Rudiger Trautmann, CEO Pago, "because he was not responsible for the purchase transaction." This is now happening so often, adds Trautmann, that many online businesses are threatened in their existence. The Pago Report 2005 goes on to report that although, at first glance, the average chargeback ratio in European e-commerce seems to be quite low, at only 0.83 percent, significant concerns are revealed in detailed analysis. The share of chargebacks, for instance, resulting from manipulated credit card data has risen from just over 4 percent in 2003 to more than 7 percent in 2004. This is presumably due to the overall increase in organized credit card fraud.

The relationship between chargeback ratio and shopping cart value has deteriorated too. Whereas the chargeback ratio for transactions of under 10 Euros is only 0.28 percent, 3.71 percent of transactions over 500 Euros end up as chargebacks! Interestingly: The chargeback ratio for the consumers from Germany, at 0.31 percent, is much lower than that for all other European consumers.

"Chargebacks not only cause financial loss to the merchant", Rudiger Trautmann explains, "but threaten his business fundamentally. If a merchant's chargeback ratio exceeds certain limits defined by the credit card organizations, credit card acceptance can be revoked. For many online shops this would be fatal." But, Trautmann adds, credit card fraud in e-commerce does not have to be an inescapable fate. "Sophisticated and effective methods of fraud protection are now available, which can help online merchants to decrease chargeback ratios dramatically. Fraud tools recognize attempted fraud at an early stage in the ordering process and notify the merchant, so that he can cancel any dangerous or suspicious transactions. Unfortunately many e-commerce enterprises underestimate the fraud threat and neglect real risk management even though investment in fraud protection tools is amortized very quickly.

About Pago Report:

Pago has published the fourth consecutive annual e-commerce study - this time entitled "Success and risk factors in international E-payment - recommendations based on real purchase transactions in 2004". The Pago Report 2005 remains only study worldwide on e-Commerce, which is not based on surveys and polls, but rather on the analyses of about 20 million real purchase transactions which were processed through the Pago platform in 2004. The results are presented in more than 150 pages containing more than 90 tables and nearly 100 graphs.

The international version of the Pago Report 2005 can be purchased at a price of 375.00 Euro (+German VAT) in the Pago Shop (http://www.pago.de/shop) until June 30, 2005.

Note: Journalists can obtain the Pago Report 2005 for free. Just ask to receive your personal discount code by e-mail. Enter this code and you will not be charged in the Pago Shop.

Pago eTransaction Services GmbH:

Pago eTransaction Services GmbH (Cologne, Germany) is an international Acquiring & Payment Service Provider for e-Commerce businesses, shops (point-of-sale) and mail-order businesses. Pago enables its clients to receive payments for their goods and services securely and quickly through electronic channels.

Because of the worldwide unique integration of credit card acquiring and payment processing, Pago gives businesses of all sizes access to all internationally and nationally relevant payment methods. The range of payment methods includes Visa and MasterCard, American Express, Diners Club, JCB, Switch/Solo as well as locally used direct debit methods.

Pago was founded in 1999 and is a Deutsche Bank AG and Beisheim Holding Schweiz AG company, offering its services through a global partner network. Pago currently operates over 5,700 active online-shop connections. Its clients include more than 7,580 companies from various industries including e-retailing, telecommunications, online-gambling, online-pharmacy and e-travel. (as of June 2005).

More information available at www.pago-international.com.

Pago eTransaction Services GmbH

Andreas Stefanis,

+49 221 3208 728

Fax: +49 221 3208 8728

presse@pago.de

or

dreimarketing GmbH

Rainer Bartel,

+49 211 984946 40

Fax: +49 211 984946 53

pago@dreimarketing.de