According to a research conducted by Lexis Nexis, annual fraud costs to US retailers rose 38% to USD 32 billion in 2014. On average, fraud costs as a percent of retailer revenue rose 17 points from 0.51% in 2013 to 0.68% in 2014.
Two factors drove the rise in aggregate fraud costs. First, retail sales grew 3.75% in 2014. Second, fraud as a percentage of retail sales increased as well, likely as a result of data breaches.
Retailers are in the process of upgrading their payment terminals and systems to a new security standard called EMV. EMV cards carry an embedded microchip that makes it more difficult to make counterfeit credit and debit cards for fraudulent transactions. But without additional layers of security such as point-to-point encryption, EMV transactions still expose high value data that can be used to make fraudulent purchases online.
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