- Sixty percent (60%) of ecommerce merchants and 53% of retailers
experienced a rise in overall fraud levels.
- Digital channels contribute to over half of fraud
losses for ecommerce and retail businesses.
- One in five transactions utilize digital payment methods such
as digital wallets, BNPL and cryptocurrency.
ATLANTA, March 27,
2024 /PRNewswire/ -- LexisNexis® Risk Solutions has
revealed the findings of the fourteenth edition of its annual
LexisNexis® True Cost of Fraud™ Study: Ecommerce
and Retail Report – U.S. and Canada Edition. The report, based
on a commissioned survey conducted by Forrester Consulting, shows
that merchants in the U.S. and Canada incur an average cost of $3.00 for every $1
of fraud.
As digital services become more prevalent in North America and daily life becomes
increasingly digitized, cybercriminals find more opportunities to
exploit both consumers and businesses. More than half of surveyed
respondents across North America
reported a fraud increase of 6% or more in 12 months
prior to the study, with digital channels responsible for 53% of
overall fraud losses.
Ecommerce organizations encounter nearly 40% more fraudulent
transactions compared to primarily brick-and-mortar retailers.
One-fifth of transaction volume happens through digital payment
methods, such as digital wallets, payment apps, Buy Now Pay Later
(BNPL) and cryptocurrency. Digital transactions
account for more than half of revenue. The widespread adoption of
these methods can expose merchants to more frequent and
sophisticated fraud attacks.
The impact of fraud on merchants is multifaceted,
encompassing fines, fees, the face value of fraudulent transactions
and the costs and effort associated with replacing lost or stolen
merchandise. Despite organizations incurring fraud
costs three times the actual value lost to fraudsters, this doesn't
account for the potential long-term effect on the customer
experience. Seventy-five percent of respondents noted an impact on
customer conversion rates.
Retailers face the challenge of balancing customer safety with
customer experience while combating new fraud methods
and integrating new fraud mitigation capabilities. The
increasing consumer adoption of a wide range of payment methods
motivates merchants to accept novel payment methods, consequently
expanding their attack surface and increasing fraud
risk.
"Striking the right balance between effective
fraud management and a seamless customer experience is
crucial," said Kimberly
Sutherland, vice president, fraud and identity
strategy, LexisNexis Risk Solutions. "It's essential for
merchants to ensure that customer onboarding and payment journeys
are as frictionless as possible to prevent shopping abandonment and
customer churn. To respond faster to emerging fraud
trends and rising consumer expectations, merchants must take a
dynamic and agile approach to risk assessment. Capabilities
integrated via risk-based workflows, supported by deep troves of
identity intelligence and robust linking technology, promote the
flexibility necessary for safer and more convenient interactions
and transactions."
Key Findings from the True Cost of Fraud Study:
Ecommerce and Retail:
- Multi-faceted Assault on Merchants: With the rise of new
digital commerce and payment methods, transaction
fraud has grown increasingly frequent and
sophisticated. Sixty percent of ecommerce merchants and 53% of
retailers report an uptick in overall fraud levels.
Retailers now identify fraudulent chargebacks as the
fastest-growing fraud type, while ecommerce merchants
point to identity theft as the fastest growing fraud
type.
- Scams Drive a Major Portion of Fraud
Losses, Despite Consumer Education Efforts: Despite 46% of
surveyed merchants stating they've made efforts to educate
customers about information security and scam protection, the
number of consumers falling victim to scams continues to rise.
About 34% of fraud losses in the region are now
attributed to scams.
- Digital Payments and BNPL Vulnerabilities: Due to the
increasing frequency and scale of data breaches that compromise
consumer data (including card information), as well as their
widespread use, credit and debit cards contribute the largest share
of fraud losses. However, merchants must also
prioritize monitoring digital payments and BNPL transactions, as
these newer methods already account for 37% of fraud
losses.
- Most Fraud Losses Occur During New Account
Creation, With More Attacks at Purchase Stage: Identity theft
fraud and fake account registration, particularly in
the ecommerce sector, pose significant risks during the new account
creation process. Both physical retail and ecommerce merchants
report that up to 47% of fraud losses stem from this
stage in the customer journey, despite lower overall occurrences
relative to other stages.
Methodology: The True Cost of Fraud Study
conducted a survey of 358 risk and fraud executives in
retail and ecommerce companies in the U.S. (289) and Canada (69). Data collection and survey
questions reference a 12-month period. The study provides
organizations with data and analysis to understand the current
state of fraud and the challenges associated with
digital payments in emerging markets. This information comes from a
commissioned study conducted by Forrester Consulting on behalf of
LexisNexis Risk Solutions in August
2023.
Download the LexisNexis® True Cost of Fraud™
Study: Ecommerce and Retail Report.
About LexisNexis Risk Solutions
LexisNexis® Risk
Solutions harnesses the power of data, sophisticated analytics
platforms and technology solutions to provide insights that
help businesses across multiple industries and governmental
entities reduce risk and improve decisions to benefit people around
the globe. Headquartered in metro Atlanta, Georgia, we have offices throughout
the world and are part of RELX (LSE: REL/NYSE: RELX), a global
provider of information-based analytics and decision tools for
professional and business customers. For more information, please
visit risk.lexisnexis.com and www.relx.com.
Media Contact:
Ade O'Connor
+44 7890 918 264
ade.o'connor@lexisnexisrisk.com
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