The UK retail sector is losing billions to payment fraud annually, new research from global fintech platform Adyen has revealed.
Working alongside the Centre for Economic Business and Research (Cebr), Adyen found that the retail sector lost £11.3 billion to fraud in 2023. On average, enterprises lost £1.4 million to fraudulent attacks, last year, though luxury fashion retailers lost £2.8 million, clothing and accessory businesses £2.6 million and health and beauty brands £1.1 million each.
Over a third of UK businesses fell victim to fraudulent activity, cyber-attacks or data leaks over the last 12 months, representing a 37% increase when comparing to the previous year’s figures. 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 (£3.8 billion).
Fraudulent activity is also impacting shopper wallets, with 33% of UK consumers becoming a victim of payments fraud over the past year, compared 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 – an increase of 16% when Adyen last conducted the survey in 2023.
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Impact of fraud on consumer behaviour
The risk of fraud has impacted consumer behaviour while shopping, both in-store and online. According to the research, a quarter 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 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 – despite the perceived inconvenience that this can cause.
Business response
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 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.
Speaking on the findings, Roelant Prins, CCO at Adyen said: “Fraud is a pervasive challenge for retailers, and today’s findings demonstrate how it can significantly impact profits. Criminals are deploying more sophisticated methods when they attack businesses, including the application of AI, and it’s therefore critical to invest in the right defence mechanisms to protect the company and customers.”
He added: “There’s no single solution to fraud defence, as 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.”
