Fraudulent retail activity increased in 2017

Every dollar of fraud cost merchants $2.77, up from $2.40 a year ago, according to the LexisNexis Risk Solutions 2017 "True Cost of Fraud" report.

The report includes the LexisNexis Fraud Multiplier, which estimates the total amount of loss a merchant incurs based on the actual dollar value of a fraudulent transaction. For merchants with digital and physical goods, the LexisNexis Fraud Multiplier has increased 63% since last year, rising from $2.18 to $3.56.

The overall report is based on a survey of more than 650 risk and fraud executives in multichannel retail organizations while detailing current fraud trends. The volume of fraud has risen from a monthly average of 206 successful fraudulent transactions to 238 per month while prevented fraudulent transactions increased from 236 to 257, according to the report. The level of fraud as a percentage of transactions is also up to 1.58% from 1.47% a year ago.

LexisNexis says fraud is growing through online channels and sales of digital goods, particularly via online transactions. New access channels and payment methods, including mobile wallets, the U.S. EMV rollout, and digital channel applications have all made the regulatory and payment landscape more challenging for merchants, the report says.

"With online fraud outpacing reported growth in e-commerce sales volume, we can point to EMV implementation at physical retail stores as a cause. Also in the digital space, botnet fraud also has risen dramatically, which correlates with the rise in e-gift card volume and fraud," said Paul Bjerke, LexisNexis Risk Solutions vice president of fraud and identify management strategy.

With e-commerce and m-commerce merchants, a slight drop has been reported debit-card fraud, likely the result of chip/pin use, LexisNexis said. However, credit card fraud remains high, with debit card fraud remaining high among merchants selling both physical and digital goods.

"Merchants selling physical and digital goods often apply a one-size-fits-all program to fight fraud, and they use a limited set of solutions,” said Kimberly Sutherland, senior director, fraud and identity management strategy for LexisNexis Risk Solutions. “These less advanced and less sophisticated legacy solutions do not appear to be working, given the sharp rise in costs and volume of successful fraud attempts."

Headquartered in metro-Atlanta, LexisNexis Risk Solutions serves customers in more than 100 countries and is part of RELX Group, a global provider of information and analytics for professional and business customers across industries. This is the eighth annual comprehensive study of U.S. merchant fraud conducted by Lexis Nexis Risk Solutions, the company said.