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LexisNexis? Study Finds Fraud Rates and Data Breaches Could Increase for Retailers Next Year

Tuesday, September 13, 2011 9:00 AM


For every $100 in fraudulent transactions, retailers incurred a "true" cost of $230, according to a new study released by LexisNexis® Risk Solutions. According to the study, retail merchants and financial institutions reported an overall decline in fraud rates and transactions while total retail sales rose. However, the research suggests that this is not the time to lose focus on fraud mitigation, as fraudsters' techniques continue to evolve as retailers enter new markets through international and mobile channels. Consumers also experienced a decline in fraud losses overall but the average time it took to resolve fraud issues rose by 57% and the out-of-pocket costs of fraud rose by $244.

The 3rd annual LexisNexis® True Cost of Fraud Study, conducted by Javelin Strategy & Research, examines how fraud affects retail merchants, financial institutions and U.S. consumers, as well as identifies and quantifies the losses involved in a fraudulent retail transaction. For the first time this study also explores the ramifications of fraud for merchants with an international presence.

The study also found that:

  • Overall, fraud rates could be poised for an upswing. The number of fraudulent transactions has decreased, but the average dollar value of a completed fraudulent transaction is higher than last year, indicating the nature of transactions is becoming more severe.
  • While on average, retail merchants report paying less per dollar for fraud than they were in 2010, small merchants and certain industries continue to report high out-of-pocket costs. E-commerce and mobile merchants are combating an influx of fraudulent transactions which tend to be large in dollar amount.
  • In 2011 damaging and large-scale data breaches occurred, providing fraudsters with more information to use against retailers, financial institutions and consumers.
  • The most lucrative areas of growth for Retail Merchants – international, mobile, and e-commerce – tend also to be the most susceptible to fraud and face the greatest risks.

"It is true there has been industry progress in fraud mitigation, however fraud continues to cost retail merchants over $100 billion annually and consumers are feeling the increased affects of fraud," says Jim Rice, Director of Market Planning for Retail and E-Commerce Markets, LexisNexis Risk Solutions.


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