Retail Fraud Revenue Losses Up 94 Percent From 2014

As the mobile commerce ecosystem keeps growing, so too do the ways the less scrupulous among us can take advantage of honest retailers.

That’s the gist of the annual LexisNexis True Cost of Fraud 2015 study released Wednesday (Sept. 16), which outlined the financial tolls illicit transactions take on businesses of every shape, size and payments method. The study found that retail fraud cost accounted for 1.32 percent of total revenue in 2015, which represents a 94-percent increase over 2014. In particular, international retailers and mobile commerce merchants stomached the heaviest blows, with 1.56 percent and 1.68 percent of revenue lost, respectively.

While the LexisNexis report itemized costs directly related to fraud, it also tabulated the excess expenses retailers often make when trying to combat or mitigate these losses. For every $100 of fraud, retailers were forced to spend $223, and manual reviews of suspicious activity constituted a large part of these costs. According to the study, upwards of 46 percent of potentially fraudulent transactions were sent for manual review.

“Manual reviews are time-consuming and expensive, driving more costs into the business and causing customer friction, which can impact overall top-line revenue,” Dennis Becker, vice president of corporate markets for LexisNexis Risk Solutions, said in a statement. “To address both issues, analyzing the solutions and decisions that contribute to the need for manual reviews is critical.”

While some retailers have yet to enact sufficiently stringent fraud protection processes throughout the omnichannel experience, the LexisNexis report points to the coming EMV security standards in debit card payments as a possible reason for the surge in fraudulent activity. However, many small to mid-sized businesses have not yet jumped on board the EMV bandwagon, which does not bode well for the future of the fraud protection industry.

With rising costs from fraud and a lack of movement on the EMV front among small retailers, the eCommerce world needs to find answers — and fast.

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. Check out the February 2019 PYMNTS Digital Fraud Tracker Report

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