The UK retail sector lost £11.3bn to fraud in 2023 reports Adyen and the Centre for Economic Business and Research. On average, enterprises lost £1.4m to fraudulent attacks. Notably, certain retail sectors are more heavily impacted.
For example, luxury fashion retailers lost £2.8m and clothing and accessory businesses lost £2.6m. On the other hand, health and beauty brands lost £1.1m each.
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Overall, a third of UK businesses (35%) fell victim to fraudulent activity, cyber-attacks or data leaks over the past year. This represents an increase of 37% compared to 2022’s numbers.
The research found that those businesses who predicted to grow their revenues by 50 – 100% or more in 2024 also lost the highest amount to fraudulent attacks over the past 12 months (£3.8bn). Adyen warns that fast growth must be met with the right technologies in place to protect the business and customers.
£311: average UK consumer loss to payment fraud
Fraudulent activity is also impacting shopper wallets. Some 33% of UK consumers became a victim of payments fraud over the past year. This compares to 23% falling victim in 2022. Payment fraud is defined as a fraudster stealing someone’s credit or debit card number, or checking account data, and using that payment information to make an unauthorised purchase.
Of those consumers who fell victim to payments fraud in 2023, £311.09 was the average amount lost per person in the UK. This figure rises by 16% since Adyen last conducted the survey in 2023.
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By GlobalDataHowever, despite the significant increase in fraudulent activity, only two-thirds of businesses (63%) said that they have effective fraud prevention systems in place. This represents an increase of 10 percentage points since last year (53%).
Impact of fraud on consumer behaviour
The risk of fraud has impacted consumer behaviour while shopping, both in-store and online. A quarter (26%) of consumers now feel more unsafe when shopping today compared to 10 years ago. This rise is due to the increased risk of payment fraud.
As a result, 16% of consumers actively choose to shop at stores which have higher security measures. When shopping online, 23% of consumers like it when retailers ask them to verify their identity in at least two different ways before making a purchase. This is despite the perceived inconvenience that this can cause.
Businesses are actively exploring how they can respond to the growing threat of fraud, in order to protect both themselves and their customers. More than half (47%) have actively considered changing their payments provider to one that can offer improved fraud defence mechanisms.
Furthermore, 46% have started considering how their business can be compliant with Payment Services Directive 3. The EU directive sets out stricter rules for protecting consumers’ rights and personal information in the finance industry.
No single solution to fraud defence
“Fraud is a pervasive challenge for retailers. Today’s findings demonstrate how it can significantly impact profits” said Roelant Prins, CCO, Adyen.
“Criminals are deploying more sophisticated methods when they attack businesses. This includes the application of AI. It’s therefore critical to invest in the right defence mechanisms to protect the company and customers.”
“There’s no single solution to fraud defence. A strategy will need to be tailored based on the business model and platforms used to make sales. With technology in place, such as machine learning tools, retailers should be able to recognise genuine customers and spot fraudulent activity across their sales channels.”
