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LexisNexis® True Cost of Fraud(SM) Study Says Merchants Are Incurring a $279 Loss For Every $100 of Fraud Losses

Nearly one in three victims of identity fraud chose to avoid specific merchants after falling victim to fraud, according to the 5th Annual LexisNexis True Cost of Fraud(SM) study released today. Commissioned by LexisNexis and conducted by Javelin Strategy & Research, the study found that between 10 and 14 million U.S. consumers are victims of identity fraud every year.

The study uses the LexisNexis® Fraud Multiplier(SM) to calculate the ‘actual cost’ of fraud incurred by retailers. It calculates the total cost of fraud shouldered by merchants. Merchants not only incur the amount of chargebacks for which their company is held liable, but they also may pay fees and interest to financial institutions and pay to replace and redistribute lost or stolen merchandise.

This year’s findings reveal merchants are paying more per dollar of fraud than in 2012, the most since 2010. More specifically, merchants are incurring a $279 loss for every $100 of fraud losses. The increase is attributed in part to the growth in fraud activity through online channels, already the most expensive channel due to costs associated with fees and interest owed to financial institutions, charge-backs and other replacement costs.

“Identity fraud is on the rise, especially in online channels,” said Dennis Becker, Vice President, Corporate Markets and Identity Management Solutions, LexisNexis. “It’s vital for merchants at every touch point to be aware of the wide-range of fraud schemes associated with making online purchases.”

As retailers gear up for the busy shopping seasons of the year, they may want to heed the following additional data points in the study:

  • After a decline in both incidence rate and total fraud between 2009 and 2010, in 2012, identity fraud has been trending upward with 12.6 million victims and $21 billion in total fraud; 1
  • Identity fraud increased from 12 percent of all of fraud in 2012 to 17 percent in 2013 for all merchants but remained stable (albeit high) at 21 percent for international merchants; and
  • Large e-commerce merchants who view fraud prevention as being too expensive experience a higher fraud rate (.74 percent) than those who do not (0.39 percent).

The study also found positive trends for online retailers. Merchants are losing a lower portion of revenue to fraud this year, 0.51 percent, compared to 0.54 percent in 2012. In addition, large e-commerce and international merchants are demonstrating exemplary fraud attitudes and behaviors which mitigate the effect of fraud losses on their bottom line. For example, large e-commerce merchants use five versus two fraud solutions, which is more than any other retail category.

The study was conducted via an online survey using a merchant panel comprising 1,139 risk and fraud decision-makers and influencers.

About Javelin Strategy & Research

Javelin Strategy & Research, a division of Greenwich Associates, provides strategic insights into customer transactions, increasing sustainable profits for financial institutions, government, payments companies, merchants and other technology providers. Javelin’s independent insights result from a uniquely rigorous three-dimensional research process that assesses customers, providers, and the transactions ecosystem.

About LexisNexis Risk Solutions

LexisNexis Risk Solutions ( is a leader in providing essential information that helps customers across all industries and government predict, assess and manage risk. Combining cutting-edge technology, unique data and advanced scoring analytics, Risk Solutions provides products and services that address evolving client needs in the risk sector while upholding the highest standards of security and privacy. LexisNexis Risk Solutions is part of Reed Elsevier, a leading publisher and information provider that serves customers in more than 100 countries with more than 30,000 employees worldwide.

Our retail solutions assist organizations with protecting revenue, maximizing operational efficiencies, and predicting and preventing retail fraud.

1 2013 Identity Fraud Report: Data Breaches Become a Treasure Trove for Fraudsters, Javelin Strategy & Research, February 2013


LexisNexis Risk Solutions
Stephen Loudermilk, 678-694-2353

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