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LexisNexis' study finds 7.3% increase in fraud costs for US retailers

Wednesday 22 July 2020 11:23 CET | News

LexisNexis Risk Solutions has released its 11th annual LexisNexis Risk Solutions 2020 True Cost of Fraud Study: e-Commerce/Retail Edition. 

The study surveyed risk and fraud executives at ecommerce and retail companies in the US and Canada and it reveals that fraud continues to increase and affects mid to large-sized ecommerce and retailers. The result translates into a 7.3% increase in the cost of fraud year-over-year for US ecommerce and retail merchants. 

The LexisNexis Fraud Multiplier – the total amount of costs related to fees, interest, merchandise replacement, and redistribution per dollar of fraud for which the merchant is held liable – shows fraud now costs companies USD 3.36 for every dollar lost to fraud. In comparison, there was USD 3.13 in 2019 and USD 2.40 in 2016. US costs are significantly higher than the cost that Canadian retailers face per USD 1 lost to fraud at USD 2.87.

Among The True Cost of Fraud Study’s  key findings and trends, one encounters:

  • Successful fraud attacks increase: The average volume of monthly fraud attacks increased 9% for US retailers year-over-year while the average number of successful monthly fraud attempts increased 43% - 48% for mid to large retailers and 27% for smaller retailers. 
  • Shutdown spurs increase in fraud costs: Mid to large general merchandise retailers selling physical and digital goods had on average 70% more fraud attempts per month than those surveyed prior to the shutdown in March 2020. Businesses that continued operations during the pandemic who had higher mobile purchase transactions with in-store pick up experienced more fraud volume and coinciding higher fraud costs since these retailers had to rely on store employees for identity authentication rather than solutions designed to detect mobile fraud.
  • Retailers struggle to keep pace with fraudsters: Retailers are finding it difficult to distinguish legitimate customers from malicious bots while balancing fraud prevention with risk-appropriate customer friction. This becomes even more complicated when purchases involve third-party, non-bank payment providers where transaction speed and volume are high and transparency into complex payment chains and end-customer profiles is low. 58% of retailers selling digital goods say differentiating synthetic identities is a top verification challenge. 

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Keywords: LexisNexis Risk Solutions, fraud, US, retailers, ecommerce, fraud attacks, retail, synthetic identities, risks
Categories: Securing Transactions | Digital Identity, Security & Online Fraud
Countries: United States
This article is part of category

Securing Transactions