UK retail sector lost £11.3bn to payments fraud last year, figures suggest

Consumers who fell victim to payments fraud in 2023 lost an average £311.09 (PA)

The UK retail sector lost £11.3 billion to payments fraud last year, figures suggest.

More than a third of UK businesses (35%) fell victim to fraudulent activity, cyber attacks or data leaks over the last 12 months, up 37% on 2022, according to the report for financial technology platform Adyen by the Centre for Economic Business and Research (Cebr).

Retail businesses lost an average of £1,394,518 each to fraudulent activity over the last 12 months, the report said.

Luxury fashion retailers lost an average of £2.8 million, clothing and accessory businesses £2.6 million and health and beauty brands £1.1 million each.

In an effort to improve online sales, many retailers have opted for more lenient online returns policies.

However, many now battle high rates of chargeback fraud. If a retailer receives a fraud-related chargeback for a transaction, it means that the cardholder claims they did not authorise or participate in the transaction.

Fraud is also impacting shoppers, with 33% of UK consumers becoming a victim of payments fraud over the past year, up from 23% in 2022, a survey found.

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.

Consumers who fell victim to payments fraud in 2023 lost an average £311.09, an increase of 16% on the year before.

Adyen chief operating officer Roelant Prins 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.

“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.”

Censuswide polled 2,002 consumers in the UK from January 15-29.