New Report Says Every $1 of Fraud Costs E-Commerce Merchants $3.60
When it comes to their list of concerns, fraud has always been at the top of the list for merchants. As the pandemic has ushered in the age of contactless payments, this threat has only grown. Contactless was well on its way, but the changes that have taken place rapidly over the past 2 years have pushed merchants to adopt this form of payment, perhaps before they were really ready.
The outcome? Fraudsters are always ready. Ready for any and every opportunity to breach a weak spot. According to Lexis Nexis Risk Solutions’ (LNRS) annual True Cost of Fraud Study for 2021, for every $1 lost directly to fraud by U.S. e-commerce retailers, it actually costs them $3.60. That is 15% higher than the last pre-pandemic measurement in 2019. It is also an increase of 7% from 2020 during the height of the pandemic.
This measurement has been used by LNRS for the past 12 years. The firm takes into account key factors like chargeback fees, restocking costs, and interest. They also include the cost of stolen goods. Considering all of these factors ensures merchants can accurately gauge just how much e-commerce fraud is affecting their bottom line.
“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 of fraud and identity for 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.”
Other important findings from the report include:
- As online transactions took off during the pandemic, so did fraud.
- Since 2020, the average increase in fraud attacks is 140%.
- Successful fraud attacks rose 52%.
U.S. retailers use eight fraud prevention solutions, while Canadian merchants use an average of just five.
How E-Commerce Merchants Can Mitigate Fraud
There are a number of ways you can protect your e-commerce business against fraud:
- Stay up-to-date on the latest fraud trends
- Partner with an industry-leading payment processor
- Encrypt transactions and emails that contain confidential information
- Require customers to log in to an individual account before making a purchase
- Ensure your team regularly receives fraud prevention training
If you need help ensuring your payment processing is safe and can withstand fraud, contact our team at firstamericanmerchant.com today. Our experts have years of experience in working with e-commerce merchants, providing them with industry-leading services that help their business grow and thrive.