Online fraud losses skyrocket
While online retailers generally understand that fraud can significantly cut into profits, they may not be aware of its full cost — or the different ways it can impact a business.
A new infographic from fraud and risk management technology provider Kount drives home the boomerang impact fraud has on e-commerce. Called “The 10 Deadly Costs of Fraud” for e-commerce retailers, here is a brief summary of its findings:
1. Lost/stolen merchandise – There was a 200% increase in fraud losses between 2014 and 2015, and fraud losses as a percentage of revenue nearly doubled to 1.32% from 0.68%.
2. For every dollar of online fraud, an average of $2.27 is lost, meaning losses are 127% higher than the actual value of lost or stolen merchandise.
3. Fraud requires manual order reviews, of which up to 90% are unnecessary.
4. Do-it-yourself fraud mitigation efforts are expensive, with an average of $5-10 in total ownership costs for every dollar of IT spend.
5. In 2015 online retailers declined 2.6% of orders due to fraud concerns. Only 0.9% of those orders were actually fraudulent, meaning retailers lost $14.5 billion in valid orders due to the 1.7% “fear of fraud” sales gap.
6. Online retailers cancel twice as many orders as they need to after fraud review, wasting $14-$109 in acquisition costs per wasted sale.
7. Orders with shipping expenses of more than $2,400 result in chargebacks or fraud 3%-3.5% of the time, compared to 0.3% of the time for orders with shipping expenses of less than $1,500.
8. Investigation of fraudulent activity wastes time of expert employees with the highest hourly cost.
9. Higher rates of fraud and chargebacks winds up in higher cost of goods passed along to consumers.
10. Consumers whose information is used in fraudulent purchases also suffer losses due to fees/penalties, momentary losses and time spent recovering accounts.
Click the infographic for more:
A new infographic from fraud and risk management technology provider Kount drives home the boomerang impact fraud has on e-commerce. Called “The 10 Deadly Costs of Fraud” for e-commerce retailers, here is a brief summary of its findings:
1. Lost/stolen merchandise – There was a 200% increase in fraud losses between 2014 and 2015, and fraud losses as a percentage of revenue nearly doubled to 1.32% from 0.68%.
2. For every dollar of online fraud, an average of $2.27 is lost, meaning losses are 127% higher than the actual value of lost or stolen merchandise.
3. Fraud requires manual order reviews, of which up to 90% are unnecessary.
4. Do-it-yourself fraud mitigation efforts are expensive, with an average of $5-10 in total ownership costs for every dollar of IT spend.
5. In 2015 online retailers declined 2.6% of orders due to fraud concerns. Only 0.9% of those orders were actually fraudulent, meaning retailers lost $14.5 billion in valid orders due to the 1.7% “fear of fraud” sales gap.
6. Online retailers cancel twice as many orders as they need to after fraud review, wasting $14-$109 in acquisition costs per wasted sale.
7. Orders with shipping expenses of more than $2,400 result in chargebacks or fraud 3%-3.5% of the time, compared to 0.3% of the time for orders with shipping expenses of less than $1,500.
8. Investigation of fraudulent activity wastes time of expert employees with the highest hourly cost.
9. Higher rates of fraud and chargebacks winds up in higher cost of goods passed along to consumers.
10. Consumers whose information is used in fraudulent purchases also suffer losses due to fees/penalties, momentary losses and time spent recovering accounts.
Click the infographic for more: