Fraud Costs Surge as North America's Ecommerce and Retail Businesses Face Mounting Financial and Operational Challenges

Rhea-AI Summary

LexisNexis Risk Solutions' fifteenth annual True Cost of Fraud Study reveals escalating fraud challenges in North American ecommerce and retail. US merchants face $4.61 costs per $1 of fraud, while Canadian merchants experience $4.52.

Mobile transactions, including digital wallets and peer-to-peer payments, account for 33% of fraud costs in the US and 41% in Canada. US ecommerce reports 53% of fraud costs from online purchases and 30% from mobile channels. The study, surveying 569 fraud executives, highlights that 63% of businesses experience increased customer churn due to fraud, while 64% report reduced conversion rates.

Notable concerns include that 41% of North American merchants still rely on manual fraud prevention processes. Customer friction remains a critical challenge, with poor user experience driving 36-37% of transaction abandonment in US retail and ecommerce during new account creation.

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LexisNexis® True Cost of Fraud™ Study Reveals US and Canada's Rising Fraud Expenses, Customer Transaction Abandonment and the Struggle to Maintain Security Without Sacrificing Customer Experience

ATLANTA, April 2, 2025 /PRNewswire/ -- LexisNexis® Risk Solutions has released the fifteenth edition of its annual LexisNexis® True Cost of Fraud™ Study: Ecommerce and Retail Report – US and Canada Edition. The report, based on a survey of 569 fraud and risk executives, reveals that fraud costs remain a growing challenge, with US merchants incurring an average cost of $4.61 for every $1 of fraud, compared to $4.52 in Canada.

Mobile transactions such as digital wallets, peer-to-peer payments and QR codes drive significant ecommerce fraud costs, accounting for 33% of expenses in the US and 41% in Canada. The US ecommerce segment reports the highest fraud costs from digital transactions, with 53% tied to online purchases and 30% to mobile channels. Canadian ecommerce faces similar challenges, with 37% of costs linked to mobile transactions, highlighting the need for merchants to protect increasingly digital payment methods.

Fraud increases customer churn for 63% of respondents and forces businesses to allocate more resources to fraud management. Sixty-four percent (64%) of respondents said fraud hurts customer conversion rates, highlighting the challenge of balancing strong security with a seamless customer experience.

A significant number of businesses are yet to adopt advanced fraud prevention tools, such as AI models, behavioral biometrics and third-party detection systems. Forty-one percent (41%) of North American merchants still depend on manual processes to prevent fraud, highlighting a widespread reliance on outdated methods.

"Rising fraud costs strain businesses financially and damage customer trust," said Maanas Godugunur, senior director, fraud and identity, LexisNexis Risk Solutions. "Staying ahead of fraudsters requires AI-powered fraud detection and a multi-layered approach that identifies fraud in real time while safeguarding the customer experience."

Key Findings from the True Cost of Fraud Study: Ecommerce and Retail – US and Canada Edition:

• Managing customer friction plays a key role in preventing fraud. Businesses must ensure security while maintaining speed and ease of use to maintain a positive user experience. Overly strict fraud prevention can frustrate customers and cause them to abandon transactions or close accounts. In the US, poor user experience (36% retail, 37% ecommerce) is the primary driver of abandonment at new account creation, showing how fraud controls can unintentionally lead to drop-off.
• Fraud impacts businesses beyond financial losses, creating operational challenges, straining customer retention and increasing compliance demands. Most businesses mix manual and automated processes, with Canadian and US ecommerce relying more on automation than retail. Only three percent (3%) of Canadian ecommerce businesses and six percent (6%) in the US fully automate fraud prevention.
• Gaps in identity verification weaken fraud prevention. Merchants struggle with onboarding processes, while ineffective authentication and fraud detection make it harder to counter evolving threats. Fraudsters target these vulnerabilities, with up to 41% of US businesses identifying identity verification as a major challenge at new account creation, higher than for purchase transactions (36%) and account logins (37%).

Methodology: The True Cost of Fraud Study by LexisNexis Risk Solutions, conducted by KS&R, surveyed 569 fraud and risk executives across US (487) and Canadian (82) retail and ecommerce companies in late 2024 and early 2025. The study examined fraud risks, challenges and costs influenced by changing consumer behaviors, increased digital transactions and evolving fraud techniques.

Download the LexisNexis® True Cost of Fraud™ Study: Ecommerce and Retail Report – US and Canada Edition.

About LexisNexis Risk Solutions
LexisNexis^® Risk Solutions harnesses the power of data, sophisticated analytics platforms and technology solutions to provide insights that help businesses across multiple industries and governmental entities reduce risk and improve decisions to benefit people around the globe. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information-based analytics and decision tools for professional and business customers. For more information, please visit LexisNexis Risk Solutions and RELX. 

Media Contact:
Ade O'Connor
Sr Manager, Int. Media Relations
ade.o'connor@lexisnexisrisk.com
+44 7890 918 264

 

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SOURCE LexisNexis Risk Solutions

FAQ

What is the current cost of fraud for US merchants according to the 2025 LexisNexis study?

US merchants incur $4.61 for every $1 of fraud, while Canadian merchants face $4.52 per $1 of fraud.

How much of fraud costs are attributed to mobile transactions in North America?

Mobile transactions account for 33% of fraud costs in the US and 41% in Canada, including digital wallets and peer-to-peer payments.

What percentage of North American merchants still use manual fraud prevention methods?

41% of North American merchants continue to rely on manual processes for fraud prevention rather than advanced tools like AI or behavioral biometrics.

How does fraud impact customer conversion rates in 2025?

64% of businesses report that fraud negatively impacts customer conversion rates, while 63% experience increased customer churn due to fraud.

What is the main reason for transaction abandonment in US ecommerce?

Poor user experience is the primary driver of abandonment at new account creation, affecting 36% of retail and 37% of ecommerce transactions.