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Press Release

Retailers Lost $139 Billion to Fraud in the Last Year, According to LexisNexis Risk Solutions Study 9/28/2010

For Every $100 in Fraudulent Transactions, Retailers Incurred $310 in Total Losses

New York, NY (September 28, 2010) – Retail merchants incurred more than $139 billion in fraud losses during the past year, according to a new study released by LexisNexis Risk Solutions®. The study revealed that for every $100 in fraudulent transactions, retailers incurred a “true” cost of $310 in total losses, including costs associated with replacing lost or stolen merchandise. Additionally, the study found that consumer victims of retail fraud incurred $5.5 billion in costs stemming from un-reimbursed losses, legal fees and other factors.

The 2nd annual LexisNexis® True Cost of Fraud Study, conducted by Javelin Strategy & Research, examines how U.S. retail fraud affects merchants, financial institutions and consumers. While the study demonstrated that fraud is more than a $100 billion problem for retail merchants, fraud losses decreased by 25 percent from 2009. The reduction may be attributed to a gradual improvement in economic conditions, greater awareness of fraud threats and increased success of effective fraud prevention solutions.

In addition to the total cost of fraud to retail merchants and consumers, the study found that:

  • Merchants who accept mobile payments saw the highest volume of fraudulent transactions; meanwhile, almost 4 in 10 merchants plan to accept mobile charges in the next 12 months.
  • Fraud appears to have a disproportionate impact on large merchants (those earning greater than $50 million in annual revenue). Large merchants experienced more than double the average annual fraud loss of their smaller counterparts.
  • More than 1 in 3 consumers who were victims of fraud will avoid certain merchants, 1 in 4 report they will spend less money, and almost 1 in 3 victims will switch payment methods.
  • Friendly fraud accounted for 1/5 of fraud affecting merchants. Friendly fraud is the term used to describe a fraud that occurs when a consumer purchases an item online, receives it, but claims they did not, requesting a refund or chargeback from the merchant or delivery of a duplicate item.

"Fraud continues to be a $100 billion problem for retail merchants," said Jim Rice, director of Market Planning for Retail and E-Commerce Markets, LexisNexis Risk Solutions. "While the total cost of fraud has gone down since last year, retailers still lose more than three dollars for every one dollar lost due to a fraudulent transaction, and online or mobile fraud is a growing threat."

The study was conducted by surveying a retail merchant panel comprising 1,006 risk and fraud decision-makers and influencers. The merchant panel includes individuals from companies of all sizes, industry segments, channels and payment methods. The study also draws on identity fraud victim data from a telephone interview survey of more than 5,000 U.S. adults including 828 fraud victims. The full report is available at http://www.lexisnexis.com/risk/2010RetailFraudStudy.

About Javelin Strategy & Research
Javelin provides superior direction on key facts and forces that materially determine the success of customer-facing financial services, payments and security initiatives. Our advantages are rigorous process, independent position, and expert people. For more information about this or other Javelin reports, please visit www.javelinstrategy.com/research.

About LexisNexis Risk Solutions
LexisNexis® Risk Solutions is the leader in providing essential information that helps advance industry and society. Building on the legacy of proven LexisNexis® services from the past 35 years, our cutting-edge technology, unique data and advanced scoring analytics provide total solutions that address evolving client needs in the risk sector while upholding high standards of security and privacy. LexisNexis Risk Solutions serves commercial organizations and government agencies and is comprised of several affiliated corporations, each offering premier customer-focused solutions. For more information, visit www.lexisnexis.com/risk/.

About LexisNexis
LexisNexis® (www.lexisnexis.com) is a leading global provider of content-enabled workflow solutions designed specifically for professionals in the legal, risk management, corporate, government, law enforcement, accounting, and academic markets. LexisNexis originally pioneered online information with its Lexis® and Nexis® services. A member of Reed Elsevier [NYSE: ENL; NYSE: RUK] (www.reedelsevier.com), LexisNexis serves customers in more than 100 countries with 15,000 employees worldwide.

Media Contact
Fiona McCaul
LexisNexis Risk Solutions
Phone: 678.694.3651
fiona.mccaul@lexisnexis.com