Study: Fraud losses, management eat up more than one-fifth of retailer revenue
Merchants’ fraud costs are a growing expense — and the pace shows no sign of slowing.
Fraud losses and management eat 8% of the average e-commerce retailer’s revenue, up from 7.6% in 2016, according to “2017 Financial Impact of Fraud Study: Exploring the Financial Impact of Fraud in a Digital World.” The report is from Vesta Corp. and Javelin Strategy & Research.
Merchants who sell only digital goods, like eBooks, eTickets and other instant download items have been the hardest hit. Fraud operations account for 9.7% of revenue, and their fraud spend increased by 42% year over year.
Compared to 2016, chargeback losses — which occur when merchants end up footing the bill for legitimate consumer or fraudster purchases — increased by 60% among digital goods merchants. This jumps to 75% among those merchants selling strictly physical goods.
Meanwhile, false positives — which occur when merchants mistakenly decline legitimate transactions — grew by 25% among digital goods merchants, and 27% among physical goods merchants.
The average e-commerce merchant now devotes 21% of its operational costs to fraud management, up from 18% in 2016. Overall, the average retailer’s fraud management spend increased 17% in 2017.
"Merchants' fraud costs continue to rise year over year," said Javelin Research director Al Pascual. "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.”
Looking ahead to the next 12 months, e-commerce retailers plan to utilize at least 14 different payment security techniques and solutions to combat fraudulent purchase attempts.
"The writing is on the wall," explained Vesta chief marketing officer Tom Byrnes. "If merchants don't modernize their fraud protocols, they won't be focused on growth or innovation; they'll be struggling to stay in business."
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Contact-free payment speeds up checkout at discount grocer
Aldi is making it easier for customers to pay for purchases.
The fast-growing deep-discount grocer now accepts all forms of contactless payment, including Apple Pay and Android Pay. Both options are available across Aldi’s nearly 1,700 stores nationwide.
Shoppers can pay for their groceries by tapping their contactless-enabled bank card, smartphone or other wearable device on a dedicated payment terminal.
"We're continually innovating to provide our customers a faster, more efficient shopping experience that saves them time and money," said Jason Hart, CEO of Aldi. "We build and run stores customers can shop quickly. Contactless payment makes shopping at Aldi that much faster and more convenient."
This is the latest move the grocer has made to streamline how customers purchase merchandise. In August, Aldi announced a pilot partnership with grocery delivery service Instacart. Shoppers can access the service on Instacart’s website or the Instacart app, and add merchandise to their virtual carts. At checkout, they can choose a delivery window from an hour away, up to a week later.
The service is available in Atlanta, Dallas, and Los Angeles, and the company is already evaluating future expansion.
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