Shopper Demand For Fast, Easy Online Transactions Is Causing More Retail Fraud, Study Says

Consumer demand for frictionless, on-the-go transactions is making retail an increasingly hot target for scammers, and fraud is costing merchants more and more each year, according to new data from LexisNexis Risk Solutions.

The analytics firm surveyed 703 risk and fraud executives across a range of retailers in March 2018 and found that successful retail fraud attempts were up nearly 30 percent over the previous year, with mobile commerce driving a significant share of the fraudulent transactions.

Particularly vulnerable were mid- to large-size merchants (those with average annual sales of at least $10 million) that sell digital goods like electronic gift cards and subscriptions. These are frequent targets because of how easy and quick they are to redeem online.

The company also measures the cost to retailers for each dollar of fraud loss, and it found that the figure rose to $2.94 in 2018, up from $2.77 in 2017. The cost of fraud as a percentage of total revenues rose from 1.58 percent in 2017 to 1.8 percent in 2018.

Most of the uptick comes from identity theft and synthetic identity fraud, which now accounts for about a third of all fraud losses. The challenge for retailers, however, is meeting customer expectations on speed and ease during transactions while simultaneously verifying their identity.

“The hotly competitive retail landscape means merchants must meet customer expectations for convenience and continually drive business growth,” said Kimberly Sutherland, LexisNexis Risk Solutions’ senior director of fraud and identity management strategy. “However, these key drivers also have increased risk for identity-related fraud, especially with the rise of synthetic identities and the volume of botnet orders.”

While digital goods are clearly easy prey for many fraudsters, the solid resale market for sneakers also makes online footwear retailers an appealing target, another report found last year.

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