The cost of an individual fraud event to retailers is…

fraud magnifier
Fraud is climbing in retail.

A new study reveals retail fraud is on the rise – and creates incremental costs for retailers.

Retailers in the U.S. and Canada incur an average cost of $3 for every $1 of fraud, according to the 14th edition of the annual “LexisNexis True Cost of Fraud Study: Ecommerce and Retail Report – U.S. and Canada Edition” from data analytics company LexisNexis Risk Solutions.

The study also reveals that retail fraud is on the rise, as 60% of surveyed e-commerce retailers and 53% of surveyed brick-and-mortar retailers experienced a rise in overall fraud levels. Brick-and-mortar respondents identified fraudulent chargebacks as the fastest-growing fraud type, while e-commerce respondents cited identity theft.

More than half of all respondents reported a fraud increase of 6% or more in the 12 months prior to the study. Digital channels contribute to 53% of fraud losses for all respondents, while 37% of fraudulent transactions experienced by all respondents utilize digital payment methods such as digital wallets, buy now, pay later (BNPL) and cryptocurrency.

LexisNexis advises that the widespread adoption of these methods can expose merchants to more frequent and sophisticated fraud attacks. In addition, e-commerce respondents encounter nearly 40% more fraudulent transactions compared to brick-and-mortar respondents.

In addition, identity theft fraud and fake account registration, particularly among e-commerce respondents, pose significant risks during the new account creation process. Both physical retail and e-commerce respondents report that up to 47% of fraud losses stem from this stage in the customer journey, despite lower overall occurrences relative to other stages.

"Striking the right balance between effective fraud management and a seamless customer experience is crucial," said Kimberly Sutherland, VP, fraud and identity strategy, LexisNexis Risk Solutions."To respond faster to emerging fraud trends and rising consumer expectations, retailers must take a dynamic and agile approach to risk assessment."

[Read more: Study: Online retailers lose $1B annually due to refund scams, other policy abuses]

The True Cost of Fraud Study conducted a survey of 358 risk and fraud executives in retail and e-commerce companies in the U.S. (289) and Canada (69). Data collection and survey questions reference a 12-month period. This information comes from a commissioned study conducted by Forrester Consulting on behalf of LexisNexis Risk Solutions in August 2023.

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