U.S. merchants are incurring $191 billion in fraud losses each year, according to a new report released Monday (Nov. 9) by LexisNexis.
Among to the 2009 LexisNexis True Cost of Fraud Benchmark Study, the average merchant must absorb nearly 10 times the identity fraud cost incurred by financial institutions. The study suggests retailers Retail “experience a massive $100 billion in losses solely attributed to identity fraud,” which jumps to $191 billion when factoring in the additional cost of lost and stolen merchandise. What’s more, merchant fraud losses amounted to more than 20 times the total value of consumer fraud victim losses which totaled approximately $4.8 billion in 2008.
“The impact of retail fraud is multifaceted and far-reaching, as this crime claims multiple victims,” said Dennis Becker, LexisNexis Risk Solutions vice president, corporate markets. “We are seeing significant increases in identity fraud overall as well as increases in typical fraud categories such as chargebacks. With the economic downturn and increasing sophistication in criminal fraud methods, it is crucial that merchants and financial institutions work together to mitigate fraud.”
• Among the numerous fraud types affecting merchants, identity fraud or fraudulent transactions made up the bulk of fraud from a cost standpoint, representing 52% of total fraud losses.
• Certain merchant segments revealed a higher prevalence of fraudulent transactions such as large eCommerce retailers, of which 40% saw an upsurge.
• Digital goods merchants attributed 54% of their fraud loss to unauthorized purchases, while merchants in telecom, social networking industries and online gaming reported 64% to 67% of their total annual fraud loss as the result of identity fraud.
• One in five merchants experienced an increase in unauthorized transactions associated with identity fraud.
• Credit card crimes continued to rise sharply, but alternative payments (i.e. online and mobile payments) represented a troubling new source of losses for large merchants.
• Friendly fraud — where a consumer makes an online purchase with their credit card, then issues a chargeback after receiving the purchase, claiming the purchase was never delivered — accounted for more than one-third of the total fraud for online-accepting merchants.