Adyen, in partnership with the Centre for Economic Business and Research, has shed light on the financial losses the global retail sector faces due to payments fraud.
The research uncovered a staggering loss of $429m across the sector in 2023 alone. Luxury fashion and health and beauty retailers were among the hardest hit, with losses amounting to $3.97m and $3.94m respectively.
Adyen’s report highlights a concerning trend: nearly half (45%) of global businesses have been victims of fraudulent activities, cyber-attacks, or data leaks within the last year. This represents a significant increase of 32% compared to the previous year. Notably, businesses anticipating revenue growth of 100% or more in 2024 reported the highest financial damages from fraud, totaling $196.4bn. This underscores Adyen’s caution that rapid growth should be paralleled with robust technological defences to safeguard both the business and its clientele.
Furthermore, the impact of fraudulent activity extends to consumers, with 35% reporting they have fallen victim to payment fraud in the past year, marking a considerable rise from 23% in 2022. The average financial loss per consumer due to these fraudulent activities soared to $808.42, a 234% increase from the previous survey.
Despite the alarming increase in fraudulent activities, only 64% of businesses believe they have effective fraud prevention systems in place, a slight improvement from 60% in the previous year. This indicates a gap in the adoption of adequate fraud prevention measures.
The rise in payment fraud has also affected consumer confidence and behaviour. A quarter of consumers now feel less safe shopping than they did a decade ago, with many actively seeking out retailers with higher security measures. Online shoppers, in particular, appreciate additional identity verification steps, despite the inconvenience they may cause.
In response to the escalating threat, over half of the businesses surveyed are reconsidering their payment providers in search of better fraud protection, and 55% are exploring compliance with the Payment Services Directive 3 (PSD3) for enhanced consumer rights and data protection.
Adyen’s Chief Commercial Officer, Roelant Prins, emphasised the importance of investing in sophisticated defence mechanisms to combat increasingly advanced fraudulent techniques. Prins highlighted the potential of machine learning tools in fraud prevention, enabling retailers to identify legitimate customers and detect fraudulent activity across sales channels. Adyen’s approach combines advanced technology with customizable risk rules to offer comprehensive protection against fraud, safeguarding retailers and their customers.
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