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'True Cost of Fraud' is $2.33 per Dollar: LexisNexis

Mercator Advisory Group by Mercator Advisory Group
September 15, 2011
in Analysts Coverage
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In its third annual True Cost of Fraud Study, LexisNexis (in collaboration with Javelin Strategy and Research) finds that each $100 lost to fraud by U.S. merchants creates $233 of actual cost to resolve fraudulent incidents. This figure declined from $300 in the prior year. While fraud losses also declined on the consumer side, the study finds, the time it took consumers to resolve incidents rose 57 percent.

Some additional findings of the study:

• Small merchants show increased interest in adoption of alternative and mobile payments; they also seem most
vulnerable and least equipped to handle the threats posed by these emerging channels.
• Large e-commerce merchants and mobile merchants continue to combat a high influx of fraudulent
transactions, which tend to also be large in dollar amount.
• A spotlight on merchants with an international presence reveals their lack of control in international arenas and
their vulnerability to ID theft and friendly fraud.

• Continuing the downward trend from last year, total merchant fraud losses declined year over year but they
continue to be a $100+ billion problem.
• Overall, fraud rates could be poised for an upswing. From the merchant’s perspective, although the number of
fraudulent transactions went down this year, the nature of transactions is trending to be more severe — the
average dollar value of a completed fraudulent transaction is higher this year than what was reported last year.

• Financial institutions warn of the sophisticated and innovative evolution of fraudster trends that will challenge
existing systems.
• Businesses run the risk of growing complacent with a false sense of safety. Merchants report significantly higher
levels of satisfaction with existing online fraud detection tools over last year, even though higher-dollar-value
fraudulent transactions are seeping through this year. They also report lowered use of these tools overall.
• Risk and fraud executives in the merchant community are calling for greater investment in fraud mitigation
technology as well as education on industry standards and best practices.

For the full report: http://img.en25.com/Web/LexisNexis/2…raud_Study.pdf

Click here to read the story.

Tags: Merchant Acquiring
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