Jul 21, 2020   SOURCE: PR NewsWire

LexisNexis Risk Solutions True Cost of Fraud Study Finds Fraud Costs Increased 7.3% for U.S. Retailers Year over Year

Study examines e-commerce and retail fraud trends before and during the COVID-19 pandemic

ATLANTA, July 21, 2020 /PRNewswire/ -- LexisNexis(®) Risk Solutions has released its 11(th) annual LexisNexis Risk Solutions 2020 True Cost of Fraud(TM) Study: e-Commerce/Retail Edition. The study that surveyed risk and fraud executives at e-commerce and retail companies in the U.S. and Canada reveals that fraud continues to increase and most acutely affects mid to large-sized e-commerce and retailers. Retailers experienced increased online and e-commerce fraud volumes and monetary losses correlating to a mass shift to online and mobile transactions during the COVID-19 pandemic.

The result of increased fraud volumes translates into a 7.3% increase in the cost of fraud year-over-year for U.S. e-commerce 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 $3.36 for every dollar lost to fraud compared to $3.13 in 2019 and $2.40 in 2016. This is an increase of $0.96 over five years. U.S. costs are significantly higher than the cost that Canadian retailers face per $1 lost to fraud at $2.87.

The True Cost of Fraud Study is a comprehensive survey that compares fraud rates, impacts and challenges related to fraud detection and prevention year-over-year and during COVID-19.

Key Findings and Trends from the Study

    --  Successful Fraud Attacks Increase: The average volume of monthly fraud
        attacks increased 9% for U.S. 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. Attack volumes were
        already trending upward prior to the shutdown as mobile and online
        channels traditionally have higher fraud rates. Some of this growth is
        due to increased transaction volume due to the temporary closing of
        brick-and-mortar retailers during the pandemic.
    --  Shutdown Spurs Increase in Fraud Costs: A comparative analysis of those
        surveyed showed that average monthly fraud attack volumes were
        significantly higher for specific retail segments who responded to the
        survey during the shutdown. 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. Mid to large retailers selling digital
        goods are more challenged detecting and preventing fraud within these
        payment types. Fifty-eight percent of retailers selling digital goods
        say differentiating synthetic identities is a top verification
        challenge. Businesses new to mobile commerce contend with these issues
        more than businesses with more established fraud and risk mitigation
        solutions.

"Retailers and e-commerce merchants should be prepared for increased fraud attacks and costs for the foreseeable future," said Kimberly Sutherland, vice president, fraud and identity management strategy, LexisNexis Risk Solutions. "It is unclear how the COVID-19 pandemic will shape the purchasing landscape over the next few years, although we do know that fraudsters will continue to shift tactics quickly in response. The most effective way for businesses to fight fraud and protect their consumers is by performing a more complete assessment, combining physical and digital identity data of those making purchases.

"High fraud costs impact e-commerce merchants and retailers as sophisticated threats increase," Sutherland continued. "A multi-layered strategy can protect retailers and e-commerce merchants throughout each buyer experience. Every transaction channel and type carry unique risks. Using different solutions to support fraud detection at various points in the consumer journey will strengthen overall defense."

LexisNexis Risk Solutions 2020 True Cost of Fraud Study: e-Commerce/Retail Edition Methodology

This is the 11(th) annual comprehensive research study on U.S. merchant fraud and the first year surveying Canadian merchants. This year's study surveyed 801 risk and fraud decision makers from late February through late April 2020. Respondents represented a wide spectrum of retail merchants: retailers offering e-commerce, retailers receiving a majority of their income though online or mobile channels and retailers offering mobile commerce. The margin of sampling error for findings reported at an overall level is +/-3.5 at the 95% confidence interval. Data reflects the U.S. and Canadian merchant population based on weighting to U.S. Economic Census.

Download a copy of the 11(th) annual LexisNexis Risk Solutions True Cost of Fraud Study: e-Commerce/Retail Edition and join our webinar with Chris Schnieper, director of fraud and identity at LexisNexis Risk Solutions, on July 29, 2020 at 2:00 p.m. ET (U.S.) for an in-depth look at the study.

About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data and advanced analytics to provide insights that help businesses and governmental entities reduce risk and improve decisions to benefit people around the globe. We provide data and technology solutions for a wide range of industries including insurance, financial services, healthcare and government. 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 across industries. For more information, please visit www.risk.lexisnexis.com and www.relx.com.

Media Contact:
Marcy Theobald
678.694.6681
Marcy.Theobald@lexisnexisrisk.com

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