Retail fraud incidence down, but dollar impact escalating
NEW YORK — For every $100 in fraudulent transactions, retailers incurred a “true” cost of $230, according to a new study released Tuesday by LexisNexis Risk Solutions.
According to the study, retail merchants and financial institutions reported an overall decline in fraud rates and transactions while total retail sales rose. Consumers also experienced a decline in fraud losses overall but the average time it took to resolve fraud issues rose by 57% and the out-of-pocket costs of fraud rose by $244.
However, fraud rates could be poised for an upswing. The number of fraudulent transactions has decreased, but the average dollar value of a completed fraudulent transaction is higher than last year, indicating the nature of transactions is becoming more severe. While on average, retail merchants report paying less per dollar for fraud than they were in 2010, small merchants and certain industries continue to report high out-of-pocket costs. E-commerce and mobile merchants are combating an influx of fraudulent transactions which tend to be large in dollar amount.
“It is true there has been industry progress in fraud mitigation, however fraud continues to cost retail merchants over $100 billion annually and consumers are feeling the increased affects of fraud,” stated Jim Rice, director of market planning for retail and e-commerce markets at LexisNexis Risk Solutions. “While e-commerce, mobile payments and international commerce provide the retail industry with the most growth opportunities, they also present the greatest challenge to fraud prevention.”
The study was conducted through an online survey completed by a merchant panel comprised of 1,006 risk and fraud decision-makers and influencers. The panel represents all company sizes, retail segments, channels and payment methods. A number of interviews also were completed with risk, fraud and financial institution executives. Finally, the study leveraged identity fraud victim data from a survey of 5,000-plus U.S. adults, including 466 fraud victims, representative of age, gender, income, and ethnicity to determine the consumer costs resulting from fraud. The full report is available here.
LexisNexis also is hosting a free webinar Sept. 14 at noon to discuss findings. To register, click here.