New research from Ravelin has shown that online retailers are experiencing a sharp rise in instances of fraud, which is costing their businesses an estimated £8.2million each year.

Original research of almost 1,500 fraud and payment professionals in its annual Global Fraud survey revealed that three quarters (77%) of online brands experienced a rise in fraud last year. The average business now loses $10.6million (£8.1million) annually to fraud, with retail and travel the most impacted sectors where the average loss increases to $11million (£8.2million).

The report also showed that the growing fraud risk wasn’t just coming from professional scammers, and that consumers were increasingly adopting deceptive behaviours when shopping online, with refund abuse becoming a key fraud flash point.

Over half (54%) of online retailers say refund abuse has increased in the past year, and a further 55% believe it will continue to rise in the next 12months. 43% of retailers now receive refund requests on more than 5% of their total sales.

Yet, despite the growing risk of fraud and the potential financial hit it presents, two thirds (66%) of retailers consider customer loyalty and brand reputation as being more important than stopping refund abuse. Almost two fifths (38%) cited friction and customer churn as the biggest obstacles to efficient fraud prevention. 

“Too many retailers are happy to dismiss fraud as a cost of doing business,” Ravelin’s CEO, Martin Sweeney, said. “Downplaying fraud to protect the customer experience is a false dichotomy.”

Balancing security measures with customer experience is considered critical according to the retailers polled in the report. Half (50%) would prefer to take a balanced approach, but 42% would opt to take a harder line and would consider blocking more customers, even if it meant ‘good’ customers faced additional friction in completing purchases.

“Armed with the right tools and intelligence, retailers can build context about every single customer, easily telling fraudsters from legitimate shoppers,” Sweeney added. “That enables them to tackle the fraudsters in the right way and ensure good customers get the great online shopping experiences they deserve.”