True Cost of Fraud Study Reveals Fraud Costs 3.75 Times the Lost Transaction Value for Each Fraudulent Transaction in Mexico

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Oct 21, 2021, 09:00 ET

MEXICO CITY, Oct. 21, 2021 /PRNewswire/ -- LexisNexis Risk Solutions released its 2021 True Cost of Fraud™ report in LATAM. The study is a comprehensive survey of 454 risk and fraud executives in retail/ecommerce, financial services and lending, including 90 companies from Mexico. Every fraudulent transaction now costs 3.68 times the lost transaction value on average in LATAM, compared to 3.46 in 2019. Survey respondents indicate that financial institutions and ecommerce merchants are affected most due to a rapid increase of digital transactions during the pandemic.

The LexisNexis Fraud Multiplier℠, which measures the total amount of loss a firm occurs based on the actual dollar value of a fraudulent transaction, found Mexican merchants in 2021 paid 3.75 times the amount of each fraudulent action, up from 3.55 in 2019. The cost of fraud includes losses related to the transaction face value for which firms are held liable, plus fees and interest incurred, fines and legal fees, labor, investigation costs and external recovery expenses.

Several factors have contributed to the sharp rise in costs, such as fraudsters targeting financial firms for account takeover and card cloning; increased consumer use of digital and contact payment methods that have translated into more fraud losses; and increased mobile channel transactions, which have created identity fraud issues.

Study findings indicate that many ecommerce merchants were unprepared for the rapid digital transactions rise brought on by the pandemic. Merchants' limited use of or access to solutions that assess digital identities and transaction risk resulted in less unmasking of synthetic identities to protect against cybercrime.

Identity fraud is a concern, particularly within the mobile channel. The percentage of fraud costs for financial institutions attributed to the mobile channel has risen in certain markets (Mexico, Colombia and Argentina) and are also high for ecommerce merchants in Brazil, Chile and Colombia.

Main findings in the 2021 True Cost of Fraud Report in LATAM:

Digital payment transaction volumes increased – Transactions involving digital payment methods increased across all Mexican payment methods. Businesses that accept credit and debit cards rose to 31% and 28% respectively, compared to 22% and 19% respectively in 2019.
Online and mobile transactions grew rapidly in Mexico – The average volume of transactions through online web browsers grew from 26% to 33% and through mobile channel 16% to 28%. Similarly, these remote channels account for more total fraud losses, with the average percent attributed to mobile transactions among retailers increasing from 23% in 2019 to 33% in 2021, and the average percent attributed to online transactions among financial services firms up from 35% in 2019 to 39% in 2021. Further, businesses offering mobile commerce increased from 69% in 2019 to 87% in 2021. The pandemic initiated a rise in Mexican businesses offering contactless payment, with the online channel representing the most significant fraud costs among financial services firms.
Mobile browsers contribute greatly to mobile channel fraud costs – Survey respondents attribute 34% of mobile channel fraud costs are coming from mobile web browsers, with 56% of this occurring in ecommerce.
Identity-related fraud is a key threat and challenge – LATAM retail/ecommerce merchants and financial institutions indicate challenges with remote transaction channels involving new payment methods and assessing device and transaction risk. Additionally, there are concerns about balancing fraud detection and prevention efforts with customer friction, since abandonment is common where customer effort increases.

"LATAM merchants and financial services firms can help prevent fraud, reduce fraud cost and better balance customer friction through cybersecurity best-practices that includes a multi-layered solution approach," said Rafael Costa Abreu, director of fraud and identity for LexisNexis Risk Solutions. "The study shows that those who follow this approach experience fewer challenges and have a 3.44 times lost value for every fraudulent transaction compared to 3.85 times lost value to those businesses utilizing technology on an ad hoc basis."

Find more information about the LexisNexis Risk Solutions 2021 True Cost of Fraud for Mexico study here.

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 (LSE: REL/NYSE: RELX), a global provider of information-based analytics and decision tools for professional and business customers. For more information, please visit www.risk.lexisnexis.com/es and www.relx.com

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SOURCE LexisNexis Risk Solutions