The 15th edition of its annual LexisNexis True Cost of Fraud Study: E-commerce and Retail Report, U.S. and Canada Edition indicated that the impact of bad actors is a growing challenge, with merchants in the United States incurring an average cost of $4.61 for every $1 of fraud compared to $4.52 in Canada.
Fraud increased customer churn for 63% of respondents and forced businesses to allocate more resources to fraud management. Then, 64% of respondents said fraud and responses to it can hurt customer conversion rates, highlighting the challenge of balancing strong security with a seamless customer experience.
A significant number of businesses have yet to adopt advanced fraud prevention tools such as AI models, behavioral biometrics, and third-party detection systems. As such, 41% of North American merchants still depend on outdated manual processes to prevent fraud.
According to LexisNexis, businesses need to ensure security while maintaining speed and ease of use to maintain a positive user experience. Overly strict fraud prevention can translate into poor user experience, the primary driver of abandonment at new account creation.
In the meantime, fraudsters target vulnerabilities, with up to 41% of U.S. businesses identifying identity verification as a significant challenge at new account creation, higher than for purchase transactions, at 36%, and account logins, at 37%.
“Rising fraud costs strain businesses financially and damage customer trust,” said Maanas Godugunur, senior director, fraud and identity, LexisNexis Risk Solutions, in announcing the study results. “Staying ahead of fraudsters requires AI-powered fraud detection and a multi-layered approach that identifies fraud in real time while safeguarding the customer experience.”
