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.