Industry experts and online retailers have called for more cross-industry co-operation and support to help combat rising fraud levels, although others argued that merchants must also accept greater responsibility to protect customer data.

New research by payment system provider CyberSource released this week found that nearly half of large online merchants recorded losses up more than ten per cent on the previous year. The CyberSource Fraud Report 2008 also found that online fraud was perceived as the most critical technical threat to their enterprise.

Many merchants feel their efforts to combat fraud are being diminished by a general lack of support from other parties, including card schemes and law enforcers, said the report.

Simon Stokes, managing director of CyberSource, said that the payment service providers, the card schemes and the acquiring banks need to coordinate their efforts to help merchants implement anti-fraud tools more effectively.

"Merchants are demanding industry coordination," he added. "Individually each party is doing something pretty well, but it's about how to join it up to the benefit of all."

There were also calls in the report for a co-ordinated effort to share information and best practice between merchants, while only 17 per cent of retailers said they thought the police are effectively challenging online fraud.

Vin Bange, associate in the data protection group at law firm Eversheds, argued that any data sharing "must be analysed carefully to ensure compliance" with data protection laws.

"The question is one of a balancing act: juggling the rights of consumers as to how their data is used and the e-tailers objectives in modeling data to prevent fraud and make fraud prevention methodologies more robust," he added.

Lu Zurawfki, director of cards and consumer payments at IT services firm Logica CMG, argued that merchants should first invest adequately in their own anti-fraud systems.

"It still amazes me that the industry is quite lacksidasical with this type of fraud," he said. "Merchants are quite a demanding lot but…they have their own responsibility to protect data too."

The research also found a significant increase in adoption of the 3-D Secure (Verified by Visa and MasterCard SecureCode) authentication schemes, with uptake now at 71 percent, but half of respondents felt these schemes were not entirely effective at preventing fraud.

CyberSource's Stokes recommended businesses install web-based automated fraud screening capabilities, alongside the 3-D Secure scheme, and address and card verification number services.