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Fraud costs surge as North America’s ecommerce and retail businesses face mounting financial and operational challenges
Written on Apr 4, 2025
LexisNexis Risk Solutions has released the 15th edition of its annual 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of North American merchants still depend on manual processes to prevent fraud, highlighting a widespread reliance on outdated methods.
Key findings:
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.