UK retail businesses lost £11.3 billion to fraud, cyber-attacks or data leaks in 2023, according to new research. And the picture was bleak too for UK consumers with a third claiming to have been victims of identity theft in the last year and the average lost is £311 per person
On average, enterprises each lost a worrying £1.4 million to fraudulent attacks, though luxury fashion retailers lost double that (£2.8 million), while clothing and accessory businesses were cheated out of £2.6 million each and health & beauty brands were down £1.1 million, according to global financial technology platform Adyen.
In a survey of over 500 UK retail businesses, 35% fell victim to fraudulent activity over the last 12 months, up 37% compared to 2022’s numbers.
It found that those businesses that predicted to grow their revenues by 50%-100% or more in 2024 also lost the highest amount to fraudulent attacks as Adyen warned that “fast growth must be met with the right technologies in place to protect the business and customers”.
Fraudulent activity is also impacting shopper’s wallets, with 33% of UK consumers becoming a victim of payments fraud over the past year, compared to 23% in 2022, according to research of over 2,000 consumers.
Payment fraud is defined as a fraudster stealing someone’s credit or debit card number, or bank account data, and using that payment information to make an unauthorised purchase. Of those consumers who fell victim to payments fraud in 2023, the aforementioned £311 average amount lost per person was an increase of 16% compared to last year’s survey.
However, despite the significant increase in fraudulent activity, only 63% of retailers said they have effective fraud prevention systems in place – an increase of just 10 percentage points since last year.
The risk of fraud has also impacted consumer behaviour while shopping, both in-store and online. In fact, 26% of consumers now feel more unsafe when shopping today compared to 10 years ago, due to the increased risk of payment fraud.
As a result, 16% of consumers actively choose to shop at stores that have higher security measures, and 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 – despite the perceived inconvenience.
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 (PSD3) – an EU directive setting out stricter rules for protecting consumers’ rights and personal information in the finance industry.