ATLANTA, Aug. 24, 2021 /PRNewswire/ -- The 12th annual LexisNexis Risk Solutions True Cost of Fraud™ Study: Ecommerce and Retail 2021 U.S. and Canada Edition provides a snapshot of current fraud trends and reveals key pain points related to merchants expanding internationally, adding new payment mechanisms and transacting through online and mobile channels. This year's findings were established through a survey conducted in March and April 2021 and show that the cost and volume of fraud has risen significantly since last year's survey and compared to a separate pre-pandemic report.
The LexisNexis Fraud Multiplier™ projects that every $1 of fraud costs U.S. retail and ecommerce merchants $3.60 compared to $3.13 prior to the pandemic. This is a 15% increase from a pre-pandemic survey and a 7.1% increase since the 2020 survey conducted during the pandemic. The cost of fraud in Canada is up 5.2% since 2020, now at $3.02. The mobile channel plays a key role in this increase in both countries, as more consumers turned to their devices to shop during the pandemic.
The pandemic changed consumer behaviors and fraudsters followed, taking advantage of merchants that accelerated mobile channel strategies. Respondents indicate there has been increased use of mobile apps and contactless payment methods at the expense of mobile browsers. This change in behavior comes with a fraud cost shift from browsers to these alternative methods.
Key Findings and Trends from the Report
- Fraud Volumes Soar: The overall volume of fraud attacks has grown beyond pre and early pandemic periods, with businesses offering online/mobile transactions experiencing the largest year-over-year increase. U.S. ecommerce merchants have been hit particularly hard with merchants reporting a 140% increase in attacks since 2020 and their counterparts in Canada reporting a 52% increase. Successful attacks rose 52% and 45% in those markets respectively.
- Struggles with Identity Verification: Identity verification remains a top challenge for merchants and represents a larger share of fraud losses compared to previous years. A recent LexisNexis Cybercrime Report revealed that synthetic identities and other account-related fraud frequently match to breached digital identity data such as email addresses and phone numbers. Merchants struggle to verify digital identity data and balance fraud detection with an exceptional customer experience. To that end, there is limited merchant use of solutions designed to support both issues.
- Implementing Fraud Mitigation Tools: U.S. retailers tend to use more fraud solutions than Canadian retailers. This includes passive/digital identity-based solutions that are effective at detecting sophisticated fraud while normalizing customer friction. The average U.S. retailer uses eight fraud prevention solutions while the average Canadian retailer only uses five. Use is more limited among ecommerce merchants in both countries, which weakens their fraud detection and prevention efforts.
- Quality Counts: Merchants that are serious about optimizing fraud detection while minimizing customer friction use multi-layered solutions across different customer touchpoints. This includes solutions that verify physical identity attributes, digital identity attributes and transaction risk. Merchants who invest in best-practice, multi layered solutions that are integrated with cybersecurity and digital experience operations experience a 71% lower volume of successful fraud attacks and a 12% lower cost of fraud.
"Retailers should anticipate and prepare for increased fraud in the foreseeable future, even as we see a light at the end of the global pandemic tunnel," said Kimberly White, senior director, fraud and identity, LexisNexis® Risk Solutions. "We should all assume that the accelerated movement to online/mobile transactions and payments spurred by the pandemic will continue as the preferred method for transacting. This means businesses must continue to build out and enhance the digital customer experience while protecting themselves against fraud.
"Organizations can no longer rely on manual processes and thin technologies to minimize fraud and reduce challenge rates, manual reviews and costs," White continued. "A solid solution includes implementing a robust fraud and security technology platform, which allows businesses to adapt to the changing digital environment while realizing strong fraud management and a risk-appropriate friction experience for genuine customers. Merchants should therefore take a multi-layered solution approach involving digital and transaction risk mitigation solutions that integrate with cybersecurity and digital customer experience operations."
2021 LexisNexis True Cost of Fraud™ Study Ecommerce and Retail 2021 U.S. and Canada Edition Methodology
This is the 12th annual comprehensive research study on U.S. merchant fraud and the second year surveying Canadian merchants. This year's study surveyed 1,118 risk and fraud decision makers from March through April 2021. Respondents represented a wide spectrum of retail merchants. Findings provide a current snapshot of key pain points related to adding new payment mechanisms, transacting through online and mobile channels and expanding internationally, amongst other topics. Study also reflects activity, fraud risks, challenges and costs associated with pandemic impacts. The margin of sampling error for findings reported at an overall level is +/-3.5 at the 95% confidence interval.
Download a copy of the 2021 True Cost of Fraud™ Study for Ecommerce and Retail, U.S. and Canada Edition. Attend a webinar on Thursday, August 26th at 3:00 pm ET to cover the study's findings.
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 and www.relx.com.
SOURCE LexisNexis Risk Solutions