The true cost of fraud

Fraud losses are up for merchants: they are now paying more per dollar in fraud than they have since 2010

Fraud losses are up for merchants: they are now paying more per dollar in fraud than they have since 2010

 According to a study ordered by LexisNexis Risk Solution, in which 1.139 risk and fraud industry members were questioned online, merchants are incurring a $279 loss for every $100 of fraud losses which has been calculated according to the full cost of fraud (for all merchants) including chargebacks, fees and interest to financial institutions as well as the replacement of goods.  We are told that the rise can be blamed on online fraud, a high risk channel, and one that is already expensive for merchants when you take into account the fees associated with e-commerce.

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Some more findings:

*10-14 million US shoppers are affected by fraud every year

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*Identity fraud is on the rise and has increased from 12% of total fraud in 2012 to 17% in 2013. It is also at its worst in the online space.

*E-merchants who do not want to invest in fraud prevention have a 0.74% fraud rate compared to those who spend money on fraud prevention and have a rate of 0.39%.

*The numbers are slightly more positive this year for online merchants, compared to 2012 at 0.51% compared to 0.54% which has been explained as an improved attitude towards fraud prevention by large e-merchants who and implementation of multiple preventative solutions (around 5). This attitude is less apparent in retail.

Despite the over-all negative sentiments of the report, it is promising to learn that some online merchants are taking control of their vulnerabilities to cyber-crime and protecting their customers.  There is no doubt that fraudsters are winning many of the battles but it seems that attention to fraud prevention is effective, to some extent, in fighting back.

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