Every $1 of fraud now costs U.S. retailers $3.36 compared to $3.13 in 2019, according to a new report. And the cost of fraud for online merchants is higher.

Fraud is costing U.S. merchants more this year than it did in 2019. And the average number of both attempted and successful fraud attacks is up as well.

For U.S.-based ecommerce merchants specifically, the number of total fraud attempts per month is 344, up 24.2% from 277 in 2019. In 2020, 118 of those attempts, or 34.3%, were prevented compared with 156 or 56.3% prevented in 2019.

The new report, from research firm Nexis Lexis, surveyed 801 risk and fraud executives in retail and ecommerce in the U.S. and Canada just before and during the COVID-19 shutdown for its findings.

When looking at all U.S. merchants—both store-based and online—the cost of fraud is up 7.3% in 2020 from 2019. Every $1 of fraud now costs U.S. retailers $3.36 compared with $3.13 in 2019, Lexis Nexis says.

When looking at U.S. ecommerce merchants, $1 of fraud costs $3.73 in 2020 for mid-to-large ecommerce merchants selling digital goods, up 6.6% from $3.50 a year earlier. For mid-to-large online merchants that sell only physical goods, the cost is $3.38, up 8.7% from $3.11 in 2019. Lexis Nexis did not break out the cost of fraud for small ecommerce merchants. Small online retailers generate less than $10 million in annual revenue. Mid-to-large merchants sell more than $10 million worth of goods online, Lexis Nexis says.


Mid-to-large U.S. e-retailers selling digital goods are hit the hardest among online retailers by fraud attempts. Monthly fraudulent transactions are up 37.1% for this segment to reach 650 fraud attacks in 2020 compared with 474 in 2019. Mid-to-large online merchants that sell only physical goods, meanwhile, allowed 14.3% more fraudulent transactions slip through each month with 407 fraudulent transactions on average per month in 2020 compared with 356 a year earlier. Small merchants saw little change at 90 fraudulent transactions per month in 2020 compared with 83 in 2019.

Identity verification is a main web and mobile web challenge for U.S. ecommerce merchants, along with being able to balance fraud prevention and customer satisfaction, Lexis Nexis says. Merchants also say they have trouble distinguishing between legitimate and bot-related transactions.


For example, when it comes to top challenges to fight fraud online, merchants list having speedy transaction approval to not keep customers waiting as top challenges for both web and mobile web transactions. 50% of U.S. ecommerce merchants list this as a web challenge and 58% as a mobile challenge. Recognizing fake online identities also ranks as a common challenge. 49% of merchants list this as a web challenge and 67% say it’s a mobile web challenge.

Additionally, mid-to-large U.S. ecommerce merchants appear to have experienced a spike in fraud during the coronavirus pandemic shutdown period, the research finds. Mid-to-large merchants selling digital goods who answered the survey during the shutdown experienced 1,611 fraudulent attempts per month on average, 16.4% more than the average of 1,384 for such merchants who answered the survey before the pandemic. For mid-to-large merchants selling only physical goods, average monthly fraud attempts during the shutdown were 1,207 compared with 1,063 before, a 13.5% increase.