The new LexisNexis® Risk Solutions 2020 True Cost of FraudTM Study:
E-commerce/Retail Edition can help navigate the growing cost of fraud.
The web and mobile fraud landscape is continually changing. Keeping up with the latest fraud trends is complicated. Technology and processes that worked yesterday may not be effective today.
At the same time, online retailers must keep the user experience top of mind. Fraud detection technology that adds friction to account openings and transactions can result in angry customers and lost sales.
Today’s consumers demand smooth, easy transactions across every channel. But as retailers and e-commerce merchants add new payment mechanisms and expand channels into online, mobile and international sectors, they inadvertently create new opportunities for fraudsters.
The LexisNexis® Risk Solutions 2020 True Cost of FraudTM Study: E-commerce/Retail Edition explores the latest fraud trends. Results were derived from a comprehensive survey of over 800 risk and fraud executives in retail and e-commerce companies in the U.S. and Canada.
Building on 11 consecutive years of research, it delivers insights into best practices for combatting fraud. The survey revealed six key findings:
1. More fraud attacks translated to higher costs for merchants.
Fraud continues to increase, with significant impacts to mid / large businesses. While rising for small businesses as well, the increased average fraud attack volume and costs are steeper for mid / large retailers. But the attack volume is only one part of the equation.
Even more concerning is that the average number of successful fraud attempts has increased. While some of this increase is due to increased fraud during the closing of bricks-and-mortar retailers due to the Covid-19 pandemic, attack volumes were already trending upward prior to the shutdown.
2. A surge in online and mobile channel activity increased fraud.
Recognizing its ease and convenience, consumers are conducting more of their shopping online. Add to that the impact of Covid-19, and it’s not surprising that online transaction volume increased among e-commerce merchants.
Additionally, mobile transactions volume went up, which in turn caused mobile fraud costs to increase. Identity-related fraud continues to be substantial, encompassing both account takeover and fraudulent account creation.
3. Distinguishing customers from malicious bots became more difficult.
Online merchants struggle to verify customer identities in near-real time without creating unnecessary friction for legitimate customers. The problem is exacerbated when transaction speed and volume is high.
The rise in volume of synthetic identities and botnets presents an increasing challenge, particularly for newer M-commerce companies. They are calling for more real-time data and better transaction tracking and fraud detection solutions if they’re to effectively balance fraud prevention with the customer experience.
4. Covid-19 increased online retail fraud.
The shuttering of numerous bricks-and-mortar retail stores combined with stay-at-home orders during the peak of the pandemic had a profound effect on retail fraud. Not surprisingly, as sales shifted to online channels, so did fraud.
E-commerce merchants who allowed mobile channel transactions as well as those selling digital goods were impacted the most during the shutdown.
5. Fraud is becoming more sophisticated.
Today’s retailers and e-commerce merchants are dealing with multiple challenges on various fronts. Fraudsters are inventive, continually trying new schemes and searching for new weaknesses to exploit.
The LexisNexis® Risk Solutions 2020 True Cost of FraudTM Study: E-commerce/Retail Edition found that:
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