Fraud Costs Retailers More Than They Know
Stores and online merchants already know of the typical ways fraud costs retailers. Identity fraud and use of stolen credit cards stick them with the cost of disputed charges. However, the costs may be even larger than they realize.
LexisNexis surveyed more than a thousand risk and fraud decision-makers and influencers for merchants. The results showed that as many as 14 million Americans fall prey to identity theft each year. When they do, almost one-third of them will avoid buying from specific merchants in the future. The ensuing lost sales are just one piece of the damage fraud does to sellers.
Other costs to merchants include:
- Chargebacks from credit card issuers for disputed charges
- Fees and interest owed to the issuers
- The cost of replacing and reselling lost or stolen merchandise.
All told, the report found that every $100 of fraud costs merchants $279.
It also found that, after a few years of decreasing incidents and losses, identify fraud was increasing. More than 12 million people were victims, with losses reaching $21 billion. Identify fraud also grew as a share of all fraud losses, from 12 percent to 17 percent.
Merchants who decided that fraud prevention cost more than it was worth made a mistake. Their fraud rate was almost double that of those who took prevention steps. Large domestic and international online sellers led the way on fraud prevention, using five fraud solutions. Consequently, the portion of their revenue lost to fraud was down slightly. Other retailers used only two solutions.
Identity theft is a multi-billion dollar enterprise and is here to stay. With merchants suffering losses almost three times the actual amount of fraud, it is imperative that they make fraud prevention a priority. Sellers who fail to do so may see their businesses fail entirely. Don’t allow your business to face the risk alone, be sure that the proper business insurance is maintained.
Let us help you make informed decision about your business insurance needs. Our licensed agents specialize in helping small businesses obtain the best coverage at the best price, give us a call today at 888-834-8619.
