Merchants losing revenue to fraud and poor management

Retail businesses are ploughing significant percentages of their revenue into fixing and remediating fraud damages, according to official reports. A Vesta Corp and Javelin Strategy research shows e-commerce retailers are losing 8% of revenue due to fraud cases. The impact is even harder on merchants who exclusively sell digital goods, such as e-books and e-tickets, with fraud operations amounting to 9.7% of revenue.

Losses in revenue are a reflection of poor management and lack of security strategies. On average, in 2017, retailers are spending 21% of their operational costs on fraud management, representing a 17% increase on last year’s numbers.

Not only are merchants losing out to fraud, but the report also showed that cases of false positives – legitimate purchases that are mistakenly declined – have grown between 25-27% among different commerce sectors.

Javelin’s Director said that fraud cases show no sign of decreasing, at least for the time being: “While some merchants have experimented with new fraud-fighting tools and tactics, on the whole, they haven’t been able to keep pace with dynamic fraudulent threats.”

Vesta Corp also warns businesses of the unwanted effects of being out of date with technology and security tools: “If merchants don’t modernise their fraud protocols, they won’t be focused on growth and innovation; they will be struggling to stay in business.”

Those numbers reflect a phenomenon on a national scale. Financial Fraud Action UK (FFA UK) revealed that financial fraud losses were almost £800m in 2016 in the UK only. Their latest official data shows that merchants are affected with 80% of all financial fraud incurred via card payments, as the chart below shows.

financial fraud losses

 From Financial Fraud Action UK

The vast majority of card fraud involves personal details which have been stolen through diverse methods such as scam email, malware and data hacks.

Still, retailers with online platforms must be extra careful. FFA UK estimates that half of all card fraud took place in e-commerce. Since 2013, online and e-commerce fraud losses have been growing significantly, bringing harmful effects to the general economy and retailers, particularly small businesses.

ecommerce fraud

 From Financial Fraud Action UK

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