How is fraud trending?

The latest LexisNexis ‘True Cost of Fraud’ study has revealed that E-commerce fraud is continuing to grow significantly, and the consequences for merchants have never been greater.

Medium and large-sized E-commerce merchants ($10M+ annual revenue) selling physical goods have seen a staggering 47% increase in fraud attempts in the past year. This means these merchants are now experiencing an average of 901 fraud attempts each month, with an average of 356 succeeding. The numbers are even higher for merchants selling digital goods.

Average # of Total Fraud Attempts Per Month

Source: LexisNexis Risk Solutions 2019 True Cost of Fraud Study E-commerce/Retail Report

This increase in fraudulent orders can be attributed in large part to the data breaches regularly affecting businesses and financial institutions. Read more about how stolen credit card data gets into your orders

The study shows the current true cost of fraudulent orders when taking into account expenses such as:
         •  Chargebacks
         •  Fees
         •  Merchandise redistribution
         •  Labor/investigation
         •  Legal prosecution
         •  IT/software security

According to the ‘LexisNexis Fraud Multiplier’, the average cost of each dollar of fraud for retailers is now $3.13. This is up by 6.5% from last year.

LexisNexis Fraud Multiplier

Source: LexisNexis Risk Solutions 2019 True Cost of Fraud Study E-commerce/Retail Report

Bot attacks

The study found a 33% increase in automated botnet activity from last year. Bot attacks were particularly active during the 2018 Thanksgiving holiday shopping week. It is necessary for merchants to be prepared as Black Friday and Cyber Monday near closer once again.

Synthetic Fraud 

Another troubling fraud trend identified in the report is the growth of 3rd party/synthetic identity fraud. This fraud pattern constitutes a serious threat to merchants as it is difficult to detect. The report finds that there are several ways fraudsters can create fake identities, and that they can use information from:
         •  “Multiple real persons into a single fake identity”
         •   One real person’s information “combined with fake data”
         •   An “entirely fabricated” identity based on a new SSN

Fraud Prevention

With these current fraud trends in mind, the report highlights the importance of using “more sophisticated fraud mitigation solutions”, and finds that “merchants which use a layered solutions approach experience fewer issues and a lower cost of fraud”.  

NoFraud’s goal is not only to stop fraud, but to boost your order approval rate at the same time. To learn more about how NoFraud can help your business navigate these ever-evolving fraud trends, reach out via email to shoshanah@nofraud.com