US retailers face $100bn in ID fraud losses a year - study
10 November 2009 | 8035 views | 0
US retailers rack up around $100 billion in identity fraud losses every year, absorbing nearly 10 times the cost incurred by financial institutions, according to a study from LexisNexis and Javelin Strategy & Research.
LexisNexis, which surveyed retailers and consumers for the research, says that when factoring in the additional cost of lost and stolen merchandise, merchants lose $191 billion to fraud every year. Merchant fraud losses amount to more than 20 times the total value lost by consumers - around $4.8 billion in 2008.
Over half of total losses are due to ID fraud and fraudulent transactions. Around 20% of merchants questioned say they have experienced an increase in unauthorised transactions associated with identity fraud, with large e-commerce retailers hit particularly hard.
Credit cards are linked to nearly half of all fraudulent transactions for merchants, and 50% of large retailers saw an upsurge in this type of fraud last year.
Criminals are also taking note of new payment methods such as online and mobile, with 29% of large retailers reporting an increase in fraud associated with these channels.
Friendly fraud - where a consumer makes an online purchase with their credit card, then issues a chargeback after receiving the purchase, claiming it was never delivered - accounts for more than one-third of the total fraud for online-accepting merchants.
Dennis Becker, risk solutions VP, corporate markets, LexisNexis, says: "The impact of retail fraud is multifaceted and far-reaching, as this crime claims multiple victims. We are seeing significant increases in identity fraud overall as well as increases in typical fraud categories such as chargebacks. With the economic downturn and increasing sophistication in criminal fraud methods, it is crucial that merchants and financial institutions work together to mitigate fraud."