Risky Business

RISKY BUSINESS Internet And Mobile Commerce Are Responsible For Higher Fraud Rate Everyone loves shopping online. Unfortunately, based on the 2012 LexisNexis "True Cost of Fraud Study," so do thieves. As retailers expand to online and mobile channels, they are finding a higher number of fraudulent transactions. We take a look at this growing and expensive problem and examine the steps retailers can take to minimize their risk of becoming victims of e-commerce fraud. Calculating Fraud Using the LexisNexis Fraud Multiplier, the study analyzed the "true cost" of fraud incurred by merchants. Fraud Multiplier, By Total Number Of Retailers: The Fraud Multiplier found that, on average, 2011 $2.30 retailers are paying $2.70 per $1 in fraud, a dramatic increase of $0.40 from last year. 2012 1 $2.70 Which Retailers Are Most At Risk? Fraud As A Percent Of Revenue, By Retailer: The Type Of Fraud E-commerce And Mobile Merchants Face The Most: E-Commerce > Mobile % Of Revenue Of Retailers Type 30% 28% Lost or stolen merchandise 54% All retailers • 60% Large e-commerce* • 24% 26% 74% International retailers • "Friendly" fraud 64% Mobile retailers*• 23% 21% Fraudulent request for return/refund 20% 24% "Identity theft" (unauthorized transaction) "Unweighted segmented data Retailers Aren't Being Proactive Retailers are preventing less fraudulent transactions in 2012 than they did in 2011. Average Number Of Fraudulent Transactions: Average Monetary Value Of Fraudulent Transactions: 119 90 2011 $122 $120) 2012 2011 2012 Large e-commerce merchants incur higher losses per fraudulent transaction, averaging a fraud ticket value of $219, than merchants overall, who average $120 per fraudulent transaction. Are Retailers Worried? say fraud is inevitable. 53% Retailers' Attitudes Toward Fraud: Hurts Customer believe the evolution of mobile as believe it costs too much 19% 50% a payment device and channel 33% to control fraud. presents significant risk. of fraud victims said they would avoid purchasing with a merchant as a result of being defrauded. think lower fraud rates increase customer loyalty. 39% 43% • say reducing fraud can help increase company sales. Taking Measures To Prevent Fraud Percentage Of Anti-Fraud Solutions Used By E-Commerce and Mobile Retailers: E-commerce Mobile 100 80 64% 54% 60 - 55% 56% 30% 29% 38% 33% 40 29% 32% 31% 22% 19% 26% 15% 15% 20 Device ID/device Automated IP geolocation Real-time Rules-based Transaction/ Card verification Transaction verification/ validation fingerprinting value (CVC or CVV1) transaction transaction- filters customer scoring tracking profile tools databases services Number Of Fraudulent Transactions 2,204 Mobile Mobile retailers are more Prevented, Mobile Vs. Non-Mobile: likely to use anti-fraud solutions and are able to prevent a higher number of 554 fraudulent transactions. Non-Mobile E-commerce has become mainstream, and the adoption of mobile payment methods (up 6% from last year) shows this trend is only continuing to grow. As e-retailers adopt this new technology, however, they must become more proactively in protecting themselves-and their customers-from fraud. Baynote Source LEXISNEXIS.COM ner Loyalty