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Global data mining firm LexisNexis released its annual True Cost of Fraud Study for Ecommerce and Retail earlier this year. The report seeks to quantify the costs incurred as a result of fraud.
It does this by calculating the total cost for each dollar lost to fraud inclusive of the fraud itself and all organizational costs associated with the fraud, including but not limited to investigation, remediation, legal, etc. Trends identified in the report can give us clues about how the fraud landscape has changed and what it will look like going forward.
In this year’s report, LexisNexis found that the cost and volume of fraud in ecommerce and retail increased substantially during 2022. Every $1 lost to fraud costs retail and ecommerce merchants $3.75, compared to $3.13 prior to the pandemic and $3.60 just last year, marking a nearly 20% increase since the beginning of the pandemic and a $0.15 increase over the past year alone.2 The increase is said to be related to the greater use of mobile commerce and coincided with the largest year-over-year increase in online/mobile transactions in history from 2020 to 20213, which has largely continued into 2022 despite the receding pandemic. Given the increased convenience of transacting digitally, this trend may slow but is unlikely to reverse.
All indications are that in the coming years these kinds of incursions will become more common and attackers will develop new strategies to obtain sensitive customer information. Merchants will have to be creative if they hope to weed out fraudulent activity.
Schneider Downs offers risk advisory, forensic accounting and other services to retailers and other business to consumer organizations. For more information, please email us at c[email protected].
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1CNBC: ‘A more than $761 billion dilemma: Retailers’ returns jump as online sales grow’ by Melissa Repko on January 25, 2022
2LexisNexis Risk Solutions: “True Cost of Fraud Study for Ecommerce and Retail”. 2022 US & Canada Edition
3US ecommerce grows 14.2% in 2021. Jessica Young, Digital Commerce 360. February 18, 2022
Additional Sources:
LexisNexis Risk Solutions: “True Cost of Fraud Study for Ecommerce and Retail”. 2021 U.S. & Canada Edition
Statista: • UK: impact of COVID-19 on grocery shopping 2021 | Statista
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