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2015 LexisNexis®
True Cost of FraudSM
The objective of the True Cost of Fraud study is to help merchants
grow their business even with the growing risk of fraud.
What it covers:
The research provides snapshots of
current fraud trends in the United States
and spotlights key pain points
merchants should be aware of as they
add new payment mechanisms and
expand channels into online, mobile,
and international.
It aims to answer a question critical to
the entire merchant community: How
do I grow my business and manage the
cost of fraud while strengthening
customer trust and loyalty?
2
Who it covers:
U.S. Retailers — Survey of 959 risk and fraud executives representing
all channels, company sizes, industry segments, and payment
methods.*
Financial Institutions — Interviews with large issuers and acquirers to
estimate FI’s cost of fraud (building on multiple Javelin studies).
Consumers — Survey of 5,000 nationally-representative US
consumers to represent the size and scope of fraud impact on victims
(building on multiple Javelin studies).
*Data reflects US Merchant population, based on weighting to U.S. Economic Census. Survey deployed April-May 2015.
Research highlights
and solutions
Merchants are losing more revenue to fraud this year.
4
*Weighted merchant data
Q: In thinking about the total fraud losses suffered by your company, please indicate the distribution of various fraud costs over the
past 12 months.
LexisNexis Risk Solutions: Retail Fraud Manager is a platform that provides a risk assessment using a
device risk score and an identity risk score to make better decisions on a transaction and reduce the risk of
fraud.
Key Takeaways:
Fraud losses as a portion
of revenue continues at
1.32%.
International and
mCommerce merchants
are losing 1.56% and
1.68% respectively.
An increase in fraud through remote channels causes an uptick in
chargebacks.
5
*Caution: Low base
Q: In thinking about the total fraud losses suffered by your company, please indicate the distribution of various fraud costs over the past 12 months.
Key Takeaway:
Due to the absence of card-
present transactions,
merchants without a physical
presence are less likely to be
restored for their losses—
leaving them liable for a
greater portion of chargebacks.
LexisNexis Risk Solutions: Our Identity solutions offer an effective way to validate identities and
addresses to help rapidly decision and approve transactions.
While merchants prevented more fraudulent transactions overall in
the past year, merchants find it up to 7x more difficult to prevent
transactions through remote channels compared to in-person.
6
Key Takeaway:
The difficulty lies in the
anonymity of nonphysical
channels, along with the ability
to conduct more fraudulent
transactions in a shorter
amount of time.
Q: Please indicate the distribution of the payment channels linked to prevented and successful fraudulent transactions.
LexisNexis Risk Solutions: A range of products are available to mitigate fraud in the online channel by
helping merchants evaluate transactions and validate shopper identities.
Fraud mitigation is an excessively manual process.
7
Key Takeaway:
Despite the use of automated
systems, close to 46% of
flagged transactions are sent
for manual review – a time-
consuming and expensive task.
Q: Number of transactions flagged as potentially fraudulent – How many transactions does your company flag as potentially
fraudulent in a typical month in the past year?
Q: What percentage was flagged by your automated system?
Q: Of this (…), what proportion are sent for manual review?
Means show.
48%52%
Flagged by automated system
Flagged manually
Detection Process:
46%54%
Sent for manual review
Not sent for manual review
Outcome:
LexisNexis Risk Solutions: Chargeback Defender® validates and accesses risk based on billing identity
and billing address and shipping identity and shipping address and establishes a link between those
identities and addresses to reduce manual order reviews.
Despite all the effort dedicated to preventing fraud, a quarter of
declines are false positives and international merchants are getting
hardest hit.
8
LexisNexis Risk Solutions:
LexisNexis® offers two solutions to help reduce false positives.
Chargeback Defender® can quickly evaluate transactions and
Risk Research offers the most accurate data in the market to
conduct due diligence.
For international merchants, LexisNexis® Instant Verify and
InstantID International includes address verification for 31
countries.
All merchants:
The level of human effort involved in
mitigating fraud is all the more troubling
since a roughly a quarter of declined
transactions end up as false positives.
International merchants
International merchants face the most acute
false positive problem. This problem is sorely
felt by international merchants, who decline
the highest percentage of flagged
transactions (27%), and were 4x as likely to
list excessively manual orders as their top
fraud mitigating challenge compared to 2014.
Fraudulent in-store pickups constitute a quarter of lost/stolen
merchandise.
9
Key Takeaway:
Merchants attribute roughly a
quarter of lost/stolen merchandise to
fraudulent in-store pickups, rendering
this channel no less susceptible to
fraud.
Q: Of this (…) of losses [constituted by lost and stolen merchandise], what percentage is from fraudulent in-store pickups?
LexisNexis Risk Solutions: Identity Risk Scoring products are available to help combat instore fraud.
Several identity solutions including InstantID, Flex ID, and Chargeback Defender® are available for this
and TrueID® and TrueID Mobile are useful at pickup time.
LexisNexis offers a range of solutions that help reduce fraud losses
and improve accuracy and productivity.
10
Our Retail Solutions:
• Help reduce fraud risk by quickly and intelligently analyzing billions of records on businesses and individuals to
uncover relevant information for better informed decision-making.
• Use extensive residential profiles, assets and derogatory histories, and leverage the power of our proprietary
algorithms and scoring capabilities to identify fraud patterns.
• Leverage powerful identity verification and authentication tools to instantly verify that an identity exists, confirm
key profile information including age, and authenticate ownership of the identity by an individual or business.
Appendix
About LexisNexis Risk Solutions
LexisNexis Risk Solutions (www.lexisnexis.com/risk/) is a leader in providing essential information that helps
customers across all industries and government predict, assess and manage risk. Combining cutting-edge
technology, unique data and advanced scoring analytics, Risk Solutions provides products and services that
address evolving client needs in the risk sector while upholding the highest standards of security and privacy.
LexisNexis Risk Solutions is part of RELX Group PLC, a leading publisher and information provider that serves
customers in more than 100 countries with more than 30,000 employees worldwide.
13
LexisNexis and the Knowledge Burst logo are registered trademarks owned by Reed Elsevier Properties Inc., used under
license. LexisNexis Fraud Multiplier is a service mark owned by Reed Elsevier Properties Inc. Chargeback Defender and InstantID
are registered trademarks of LexisNexis Risk Solutions FL Inc. TrueID is a registered trademark of LexisNexis Risk Solutions Inc.

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2015 LexisNexis® True Cost of Fraud

  • 2. The objective of the True Cost of Fraud study is to help merchants grow their business even with the growing risk of fraud. What it covers: The research provides snapshots of current fraud trends in the United States and spotlights key pain points merchants should be aware of as they add new payment mechanisms and expand channels into online, mobile, and international. It aims to answer a question critical to the entire merchant community: How do I grow my business and manage the cost of fraud while strengthening customer trust and loyalty? 2 Who it covers: U.S. Retailers — Survey of 959 risk and fraud executives representing all channels, company sizes, industry segments, and payment methods.* Financial Institutions — Interviews with large issuers and acquirers to estimate FI’s cost of fraud (building on multiple Javelin studies). Consumers — Survey of 5,000 nationally-representative US consumers to represent the size and scope of fraud impact on victims (building on multiple Javelin studies). *Data reflects US Merchant population, based on weighting to U.S. Economic Census. Survey deployed April-May 2015.
  • 4. Merchants are losing more revenue to fraud this year. 4 *Weighted merchant data Q: In thinking about the total fraud losses suffered by your company, please indicate the distribution of various fraud costs over the past 12 months. LexisNexis Risk Solutions: Retail Fraud Manager is a platform that provides a risk assessment using a device risk score and an identity risk score to make better decisions on a transaction and reduce the risk of fraud. Key Takeaways: Fraud losses as a portion of revenue continues at 1.32%. International and mCommerce merchants are losing 1.56% and 1.68% respectively.
  • 5. An increase in fraud through remote channels causes an uptick in chargebacks. 5 *Caution: Low base Q: In thinking about the total fraud losses suffered by your company, please indicate the distribution of various fraud costs over the past 12 months. Key Takeaway: Due to the absence of card- present transactions, merchants without a physical presence are less likely to be restored for their losses— leaving them liable for a greater portion of chargebacks. LexisNexis Risk Solutions: Our Identity solutions offer an effective way to validate identities and addresses to help rapidly decision and approve transactions.
  • 6. While merchants prevented more fraudulent transactions overall in the past year, merchants find it up to 7x more difficult to prevent transactions through remote channels compared to in-person. 6 Key Takeaway: The difficulty lies in the anonymity of nonphysical channels, along with the ability to conduct more fraudulent transactions in a shorter amount of time. Q: Please indicate the distribution of the payment channels linked to prevented and successful fraudulent transactions. LexisNexis Risk Solutions: A range of products are available to mitigate fraud in the online channel by helping merchants evaluate transactions and validate shopper identities.
  • 7. Fraud mitigation is an excessively manual process. 7 Key Takeaway: Despite the use of automated systems, close to 46% of flagged transactions are sent for manual review – a time- consuming and expensive task. Q: Number of transactions flagged as potentially fraudulent – How many transactions does your company flag as potentially fraudulent in a typical month in the past year? Q: What percentage was flagged by your automated system? Q: Of this (…), what proportion are sent for manual review? Means show. 48%52% Flagged by automated system Flagged manually Detection Process: 46%54% Sent for manual review Not sent for manual review Outcome: LexisNexis Risk Solutions: Chargeback Defender® validates and accesses risk based on billing identity and billing address and shipping identity and shipping address and establishes a link between those identities and addresses to reduce manual order reviews.
  • 8. Despite all the effort dedicated to preventing fraud, a quarter of declines are false positives and international merchants are getting hardest hit. 8 LexisNexis Risk Solutions: LexisNexis® offers two solutions to help reduce false positives. Chargeback Defender® can quickly evaluate transactions and Risk Research offers the most accurate data in the market to conduct due diligence. For international merchants, LexisNexis® Instant Verify and InstantID International includes address verification for 31 countries. All merchants: The level of human effort involved in mitigating fraud is all the more troubling since a roughly a quarter of declined transactions end up as false positives. International merchants International merchants face the most acute false positive problem. This problem is sorely felt by international merchants, who decline the highest percentage of flagged transactions (27%), and were 4x as likely to list excessively manual orders as their top fraud mitigating challenge compared to 2014.
  • 9. Fraudulent in-store pickups constitute a quarter of lost/stolen merchandise. 9 Key Takeaway: Merchants attribute roughly a quarter of lost/stolen merchandise to fraudulent in-store pickups, rendering this channel no less susceptible to fraud. Q: Of this (…) of losses [constituted by lost and stolen merchandise], what percentage is from fraudulent in-store pickups? LexisNexis Risk Solutions: Identity Risk Scoring products are available to help combat instore fraud. Several identity solutions including InstantID, Flex ID, and Chargeback Defender® are available for this and TrueID® and TrueID Mobile are useful at pickup time.
  • 10. LexisNexis offers a range of solutions that help reduce fraud losses and improve accuracy and productivity. 10 Our Retail Solutions: • Help reduce fraud risk by quickly and intelligently analyzing billions of records on businesses and individuals to uncover relevant information for better informed decision-making. • Use extensive residential profiles, assets and derogatory histories, and leverage the power of our proprietary algorithms and scoring capabilities to identify fraud patterns. • Leverage powerful identity verification and authentication tools to instantly verify that an identity exists, confirm key profile information including age, and authenticate ownership of the identity by an individual or business.
  • 11.
  • 13. About LexisNexis Risk Solutions LexisNexis Risk Solutions (www.lexisnexis.com/risk/) is a leader in providing essential information that helps customers across all industries and government predict, assess and manage risk. Combining cutting-edge technology, unique data and advanced scoring analytics, Risk Solutions provides products and services that address evolving client needs in the risk sector while upholding the highest standards of security and privacy. LexisNexis Risk Solutions is part of RELX Group PLC, a leading publisher and information provider that serves customers in more than 100 countries with more than 30,000 employees worldwide. 13 LexisNexis and the Knowledge Burst logo are registered trademarks owned by Reed Elsevier Properties Inc., used under license. LexisNexis Fraud Multiplier is a service mark owned by Reed Elsevier Properties Inc. Chargeback Defender and InstantID are registered trademarks of LexisNexis Risk Solutions FL Inc. TrueID is a registered trademark of LexisNexis Risk Solutions Inc.