Digital Transactions Authoritative, insightful and timely information for payments professionals
Fraud is nothing if not a persistent part of the payments landscape. It became more so in the past 12 months, as 60% of e-commerce merchants and 53% of retailers sustained increases in overall fraud levels, finds LexisNexis Risk Solutions in the 14th edition of its “LexisNexis True Cost of Fraud Study: Ecommerce and Retail Report—U.S. and Canada Edition.”
The report, based on a survey of 358 risk and fraud executives, finds that for every $1 in fraud, merchants pay an average of $3 for recovery efforts. That’s down the $3.75 in recovery costs found by the 2022 report. The report doesn’t address reasons behind the decrease.
LexisNexis Risk Solutions also found that, as digital services become more prevalent, criminals are finding more ways to exploit consumers and businesses. More than half of the respondents reported a 6% or greater increase in fraud in the 12 months prior to the study, with digital channels responsible for 53% of overall fraud losses.
Among the fastest-growing fraud types are fraudulent chargebacks, with 59% citing this as a problem for retailers. The fastest-growing fraud type in e-commerce is identity-theft fraud, cited by 65%. It also found that first-party fraud is just as common as third-party fraud. The payments industry has announced programs to counter first-party fraud, namely Mastercard Inc.’s First Party Trust Program and Visa Inc.’s first-party fraud rule changes.
As is often pointed out, criminals continually adapt not only to changing consumer behaviors, but also to merchant tactics to counter their attacks. Forty-seven percent of U.S. retailers say the rise of synthetic identities and the need to balance speed of approval against checkout friction made it difficult to serve online customers. For U.S. e-commerce merchants, 47% say the use of mobile channels for transactions was a challenge, as did 47% citing synthetic identity use.
To counter all of this, 69% of merchants expect to increase their spending on fraud prevention over the next 12 months, the report says.
“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,” Kimberly Sutherland, LexisNexis Risk Solutions vice president of fraud and identity strategy, says in a statement. “To respond faster to emerging fraud trends and rising consumer expectations, merchants must take a dynamic and agile approach to risk assessment.”
