Escalating fraud costs and evolving identity fraud threats are an ever-increasing challenge for the retail sector. Over the course of a year-over-year study,2018 True Cost of Fraud, by LexisNexis, successful retail fraud attempts rose 30%. To make matters worse, the impact of the fraud goes beyond the value of fraudulent transactions for merchants of all kinds.
In their 2018 report, LexisNexis discovered that every $1 in fraudulent online transactions actually cost merchants $2.94. However, depending on the size of the merchant, the type of goods they sell and what channels are used to sell them, the cost can be much more.
For the online channel in 2018, the multiplier is $2.96. However overall costs are much higher for digital-goods merchants that accept online payments through mobile devices. There is also a notable difference in the level of fraud when it comes to what is being sold. The multiplier is $2.78 for midsize and large companies that engage in m-commerce to sell physical goods. For merchants that sell digital goods, the costs incurred are $3.29 for every $1 in fraudulent transactions.
And that’s not all. According to the survey, the cost of fraud as a percentage of revenue is also higher for m-commerce merchants than for others. 1.36 percent ofdomestic merchant’s total annual revenue is lost at their physical POS. Large merchants (more than $50 million in annual revenue) with an e-commerce channel lost 1.91 percent in fraud costs. In addition, merchants that handle transactions from other countries – either via e- or m-commerce – lose 2 percent, while midsize and large merchants lose 2.10 percent of their sales to fraud.
“The hotly competitive retail landscape means merchants must meet customer expectations for convenience and continually drive business growth,” explained Kimberly Sutherland, senior director of fraud and identity management strategy for LexisNexis Risk Solutions. “However, these key drivers also have increased risk for identity-related fraud, especially with the rise of synthetic identities and the volume of botnet orders.
Sutherland went on to say, “Therefore, it’s crucial for retailers to not just invest in a large number of fraud prevention solutions, but the right combination and layering of the solutions to defend against different threats.”
How can merchants manage fraud, obstacles like American express chargebacks and meet customers’ expectations? This is just one of the reasons why merchants are turning to alternative lenders for support. The chargeback protection programs they offer can help businesses be proactive in fraud prevention and offer fast, secure payment process services that keep customers’ needs at the forefront.