Fraud is a growing problem for online retailers, particularly ones that accept payments made through mobile devices, according to the “2016 LexisNexis True Cost of Fraud” report released Tuesday.
The average number of successful fraudulent transactions grew 32.1% year over year in 2015, with retailers responding to a survey reporting an average of 206 fraudulent transactions per month compared with 156 in 2014, according to LexisNexis. Retailers’ prevention efforts are barely keeping up with the growth in fraud, however. Retailers reported an average of 236 prevented fraudulent transactions per month in 2015, up 33.3% from 177 the year before.
LexisNexis Risk Solutions in January and February surveyed 1,007 retail risk and fraud executives who work for merchants, asking about fraud and losses incurred in the past year. Those merchants include small sellers, with less than $1 million in online sales each year; medium-sized merchants, with between $1 million and $50 million in sales; and large retailers, more than $50 million.
It’s not just number of fraudulent transactions that is growing, however. Fraud increasingly is eating into revenue. LexisNexis found fraud losses in 2015 were equivalent to an average of 1.47% of revenue for retailers in the survey, up from 1.32% in 2014 and 0.51% in 2013. Merchants categorized as m-commerce merchants, that “accept payments through either a mobile browser or mobile application, or bill payments to a customer’s mobile carrier,” got hit harder than average, with fraud equaling 1.69% of revenue, up from 1.39% last year and 0.8% in 2013.
While LexisNexis found that only 16% of retailers surveyed accept payments from mobile devices, 32% are considering adding the capability within a year. As mobile commerce grows—an eMarketer report showed that retail sales via smartphone are expected to surpass $75 billion in 2017—retailers need to make sure they have precautions in place to prevent fraudulent transactions, LexisNexis says.
“Fraud in this channel is only going to grow as more merchants enter this space; more types of mobile transaction methods will emerge beyond the typical browser,” the report says. “As a result, m-commerce merchants may need to rely on different variations of solutions depending on transaction methods, including device ID/fingerprinting, 3D secure tools, and geolocation.”Favorite