As digital services become more prevalent in North America and daily life becomes increasingly digitized, cybercriminals find more opportunities to exploit both consumers and businesses. LexisNexis® Risk Solutions’ 14th edition of its annual LexisNexis® True Cost of Fraud™ Study: Ecommerce and Retail Report – U.S. and Canada Edition found that merchants in the U.S. and Canada incur an average cost of $3 for every $1 of fraud.
More than half of surveyed respondents across North America reported a fraud increase of 6% or more in 12 months prior to the study, with digital channels responsible for 53% of overall fraud losses.
Multi-faceted Assault on Merchants
According to the report, 60% of ecommerce merchants and 53% of retailers report an uptick in overall fraud levels. Retailers now identify fraudulent chargebacks as the fastest-growing fraud type, while ecommerce merchants point to identity theft as the fastest growing fraud type.
One-fifth of transaction volume happens through digital payment methods, such as digital wallets, payment apps, Buy Now Pay Later (BNPL) and cryptocurrency. Digital transactions account for more than half of revenue, the report states. The widespread adoption of these methods can expose merchants to more frequent and sophisticated fraud attacks.
The impact of fraud on merchants is multifaceted, encompassing fines, fees, the face value of fraudulent transactions and the costs and effort associated with replacing lost or stolen merchandise, as stated in the report. Despite organizations incurring fraud costs three times the actual value lost to fraudsters, this doesn’t account for the potential long-term effect on the customer experience. Seventy-five percent of respondents noted an impact on customer conversion rates.
Scams Drive a Major Portion of Fraud Losses
Despite 46% of surveyed merchants stating they’ve made efforts to educate customers about information security and scam protection, the number of consumers falling victim to scams continues to rise. About 34% of fraud losses in the region are now attributed to scams, according to the report.
Retailers face the challenge of balancing customer safety with customer experience while combating new fraud methods and integrating new fraud mitigation capabilities. The increasing consumer adoption of a wide range of payment methods motivates merchants to accept novel payment methods, consequently expanding their attack surface and increasing fraud risk.
