$429 Billion Reportedly Lost by Global Retail Sector to Payments Fraud Last Year

Adyen (AMS: ADYEN), the global financial technology platform for businesses, has published new research revealing the billions the global retail sector loses to fraudulent activity annually.

Working alongside the Centre for Economic Business and Research (Cebr), Adyen found that the retail sector “lost $429 billion to payments fraud in 2023. On average, enterprises lost $2.98 million to fraudulent attacks, though luxury fashion retailers lost $3.97 million and health and beauty brands $3.94 million each.”

In total, nearly half of global businesses (45%) fell victim “to fraudulent activity, cyber-attacks or data leaks over the last 12 months, which has increased by 32% when comparing to 2022’s numbers.”

The report found that those businesses “who predicted to grow their revenues by 100% or more in 2024 also lost the highest amount to fraudulent attacks over the past 12 months ($196.4 billion), as Adyen warns that fast growth must be met with the right technologies in place to protect the business and customers.”

Fraudulent activity is also impacting shopper wallets, “with over a third (35%) of consumers globally becoming a victim of payments fraud over the past year, compared to 23% falling victim in 2022. Payment fraud is defined as a fraudster stealing someone’s credit or debit card number, or checking account data, and using that payment information to make an unauthorised purchase.”

Of those consumers who fell victim “to payments fraud in 2023, $808.42 was the average amount lost per person globally – an increase of 234% when Adyen last conducted the survey in 2023.”

However, despite the significant “increase in fraudulent activity, only two-thirds of businesses (64%) said that they have effective fraud prevention systems in place – an increase of only 4 percentage points since last year (60%).”

The risk of fraud has impacted consumer behaviour “while shopping, both in-store and online. In fact, a quarter (25%) of consumers now feel more unsafe when shopping today compared to 10 years ago, due to the increased risk of payment fraud.”

As a result, 24% of consumers actively “choose to shop at stores which have higher security measures, and when shopping online, 22% of consumers like it when retailers ask them to verify their identity in at least two different ways before making a purchase – despite the perceived inconvenience that this can cause.”

Businesses are actively exploring “how they can respond to the growing threat of fraud, in order to protect both themselves and their customers.”

More than half (54%) have actively considered “changing their payments provider to one that can offer improved fraud defence mechanisms.”

Furthermore, 55% have started considering “how their business can be compliant with Payment Services Directive 3 (PSD3) – an EU directive setting out stricter rules for protecting consumers’ rights and personal information in the finance industry.”

Roelant Prins, CCO, Adyen said:

“Fraud is a pervasive challenge for retailers, and today’s findings demonstrate how it can significantly impact profits. Criminals are deploying more sophisticated methods when they attack businesses, including the application of AI, and it’s therefore critical to invest in the right defence mechanisms to protect the company and customers.”

As noted in the update:

“There’s no single solution to fraud defence, as a strategy will need to be tailored based on the business model and platforms used to make sales. With technology in place, such as machine learning tools, retailers should be able to recognise genuine customers and spot fraudulent activity across their sales channels.”

The report added:

“Machine learning can help to analyse global data sets and therefore keep on top of new fraudulent activity, ensuring the business is protected in real-time. We use advanced technology combined with customisable risk rules to protect retailers and their customers – blocking fraud, preventing disputes and staying ahead of the latest fraud trends.”

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