Skip to main content

Study: Digital sales drive fraud transaction volume

Fraud volume has risen sharply in the last year — an issue that’s being blamed on online channels and sales of digital goods.

Online fraud is outpacing e-commerce sales volume as the monthly average of fraudulent transactions jumped from 206 to 238 incidents, according to LexisNexis Risk Solutions’ report, “2017 True Cost of Fraud.”

While prevented fraudulent transactions have increased from 236 to 257, the level of fraud as a percentage of revenues has also inched upward from 1.47% to 1.58%. Every dollar of fraud cost merchants $2.77, up from $2.40 a year ago.

Online channels and sales of digital goods, particularly international transactions, are the biggest culprits of fraudulent transactions. When it comes to the cost per dollar of fraud, merchants with international transactions have significantly higher incidents than merchants with domestic-only transactions. This coincides with the rise in account hacking and takeovers, the study reported.

New access channels and payment methods, including mobile wallets, the EMV rollout in the United States, and digital channel applications are also making the regulatory and payment landscape more challenging for merchants, according to the report.

Other findings include:

• The loss incurred among merchants with digital and physical goods has increased 63% since last year, rising from $2.18 to $3.56.

• A slight drop in debit card fraud was reported among e-commerce and m-commerce merchants, likely the result of chip/PIN use. However, credit card fraud remains high, with debit card fraud remaining high among merchants selling both physical and digital goods.

• When discussing the top three challenges that retailers are facing, identity verification remains the highest for the online channel. However, top mobile channel issues vary, suggesting there is more complexity in this channel.

"With online fraud outpacing reported growth in e-commerce sales volume, we can point to EMV implementation at physical retail stores as a cause,” said LexisNexis Risk Solutions VP of fraud and identity management strategy, Paul Bjerke.  "Also in the digital space, botnet fraud also has risen dramatically, which correlates with the rise in e-gift card volume and fraud."
This ad will auto-close in 10 seconds