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Fraud rises in 2023 for businesses, consumers alike

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The U.S. retail sector lost a total of $60 billion to payments fraud in 2023.

Half of U.S. businesses fell victim to fraudulent activity last year, with many paying a steep financial price.

According to a new report from financial tech platform Adyen, 50% of businesses fell victim to fraudulent activity, cyber-attacks or data leaks over the last 12 months, an increase of 19% when compared to 2022’s numbers.

The U.S. retail sector lost a total of $60 billion to payments fraud in 2023. On average, enterprises lost $2.96 million to fraudulent attacks last year, though the typical luxury fashion retailer lost an average of $5.21 million.

The report found that those businesses who predicted to grow their revenues by 100% or more in 2024 also lost the highest amount to fraudulent attacks over the past 12 months ($35 billion). In response, nearly two-thirds of businesses (63%) have actively considered changing their payments provider to one that can offer improved fraud defense mechanisms.

“Fraud is a pervasive challenge for retailers, and today’s findings demonstrate how it can  significantly impact profits,” said Roelant Prins, chief commercial officer at Adyen. “Criminals are deploying more sophisticated methods when they attack businesses, including the application of AI, and it’s therefore critical to invest in the right defense mechanisms to protect the company and customers.”

Fraudulent activity is also impacting shoppers’ wallets. Nearly half (47%) of consumers surveyed have become a victim of payments fraud over the past year, compared to 42% falling victim in 2022. Payment fraud is defined as a fraudster stealing someone’s credit or debit card number, or checking account data, and using that payment information to make an unauthorized purchase. The typical American consumer who fell victim to payments fraud in 2023 lost an average of $679.82, an increase of 149% over the prior year.

Adyen found the risk of fraud has impacted consumer shopping behavior, both in-store and online. A quarter (26%) of consumers now feel more unsafe when shopping today compared to 10 years ago, due to increased payment fraud risk.

“There’s no single solution to fraud defense, as a strategy will need to be tailored based on the business model and platforms used to make sales,” added Prins. “With technology in place, such as machine learning tools, retailers should be able to recognise genuine customers and spot fraudulent activity across their sales channels.”

Adyen’s research included more than 40,000 consumers and more than 13,500 merchants globally.

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