Each $1 of Fraud Loss Actually Costs Merchants $3.75, Says Report

Each $1 of Fraud Loss Actually Costs Merchants $3.75, Says Report

August 4, 2022

Every dollar lost in fraudulent transactions actually cost U.S. merchants $3.75. Each year for the last 13 years LexisNexis Risk Solutions has used a proprietary formula to calculate a multiplier that estimates how much fraud actually costs merchants over and above the value of the fraudulent transaction. The multiplier includes inputs like restocking, chargebacks and other fees associated with fraud.

The Atlanta-based antifraud technology provider’s 2022 True Cost of Fraud Study found the cost to merchants from fraudulent transactions has risen nearly 20 percent since 2019—increasing from $3.13 in 2019 to $3.36 last year to $3.75 this year.

In addition to the TCOF multiplier, the study also found 35 percent of e-commerce transactions were malicious, the highest of any segment. And most merchants felt they were most susceptible to fraud at the account creation or login level.

“Businesses should take a multi-layered solution approach unique to different customer journey phases, which assesses the risks and behaviors within various digital channels,” said Maanas Godugunur, director of fraud and identity at LexisNexis Risk Solutions. “Study findings show that firms that follow this approach are likely to realize a lower cost of fraud, experience fewer successful fraud attacks per month and have challenges with identity verification, bot attacks and customer friction.”

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