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Every $100 of Fraud Costs Merchants $308, up from $279 in 2013 According to LexisNexis Risk Solutions Study

Cost of Retail Fraud Jumps 10% over 2013, Marking Three-year Upswing

9/15/2014

ATLANTA – LexisNexis® Risk Solutions released today its sixth annual True Cost of Fraud(SM) study, which reveals that fraud is eating deeper into retailers’ revenues. Merchants lost 0.68% of revenue to fraud in 2014 in comparison to 0.51% in 2013. Losses are on the rise as fraudsters dramatically increased their efforts, often overwhelming merchants.

Another driver causing the cost of fraud to rise to $308 (2014) from $279 (2013), a 10 percent increase, is retailers’ forays into the mobile channel, which is now a must-have tool to reach and engage customers. As the mobile channel grows, fraud is growing right along with it. This year’s study results indicate that mobile channel fraud costs merchants $334 for every $100 of fraud loss. Internet Retailer’s Mobile 500 states that sales through mobile commerce of the world’s top 500 retailers should reach $84 billion by the end of 2014. Many of the tools that are designed to stop fraud in the eCommerce channel aren’t always as effective in the mobile space.

Dennis Becker, LexisNexis Risk Solutions vice president, said,  “There is a significant amount of money at risk for retailers;  as retail buyer behavior shifts to other channels, like mobile, it’s important for merchants to strike a balance by having the right tools in place that reduce customer friction while helping prevent fraud.”

The study also indicates that large eCommerce merchants are among the most at risk of fraud compared to other types of merchants. Even though their general fraud awareness and use of existing fraud solutions is high compared to all merchant categories, large eCommerce companies have reduced the number of fraud solutions that they use: four solutions in 2014 versus five solutions in 2013.

The LexisNexis study measures the economic impact of the following:

  • Fraudulent and/or unauthorized transactions,
  • Fraudulent refund/return requests and bounced checks,
  • Lost or stolen merchandise, redistribution costs of redelivering purchased items (carrier fraud).

  • Methodology
    The study was conceptualized by LexisNexis Risk Solutions and executed by Javelin Strategy & Research via an online survey using a U.S. retail merchant panel composed of 1,142 risk and fraud decision-makers and influencers. In addition, in-depth interviews were conducted with risk and fraud executives at five financial institutions to obtain their perspective on fraud issues.

About LexisNexis Risk Solutions
LexisNexis Risk Solutions harnesses the power of data and advanced analytics to provide insights that help businesses and governmental entities reduce risk and improve decisions to benefit people around the globe. We provide data and technology solutions for a wide range of industries including insurance, financial services, healthcare and government. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX Group (LSE: REL/NYSE: RELX), a global provider of information and analytics for professional and business customers across industries. For more information, please visit www.risk.lexisnexis.com and www.relx.com.

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