Australian retail businesses lost an average of $2.2 million to fraud in 2023, according to a new report from global financial technology platform, Adyen. In total, nearly half of Australian retailers (43%) fell victim to cyberattacks or data leaks over the last 12 months, an increase of 10% when compared to 2023’s numbers.
The Adyen Index Australia: Retail 2024, in conjunction with the Centre for Economic Business and Research (Cebr), exposes the impact of fraud on the Australian retail sector. It revealed a surge in fraud attempts among Australian retailers, with over two in five (42%) agreeing, as Adyen cautions that these incidents could have significant consequences.
Despite the significant increase in fraudulent activity, only two-thirds of businesses (67%) said that they have effective fraud prevention systems in place – an increase of only 9 percentage points since last year (58%).
The risk of fraud has impacted consumer behaviour while shopping both in-store and online. More than one-third (36%) of Australian consumers now feel more unsafe when shopping today compared to 10 years ago, due to the increased risk of payment fraud. Globally the figure stands at 25%, meaning Australians are more concerned than their international counterparts.
As a result, 24% of Australian consumers actively choose to shop at stores which have higher security measures, and when shopping online, 22% like when retailers ask them to verify their identity in at least two different ways before making a purchase – despite increased inconvenience or friction during the checkout process.
Businesses are actively exploring how they can respond to the growing threat of fraud to better protect their customers and themselves. More than half (52%) have actively considered changing their payments provider to one that can offer improved fraud defence mechanisms.
Further, more than half (54%) have started considering how their business can be compliant with Payment Services Directive 3 (PSD3) – a directive from the European Union setting out stricter rules for protecting consumers’ rights and personal information in the finance industry.
“Fraud is a pervasive challenge for retailers, and our 2024 Retail Index findings demonstrate how it could be significantly impacting profits,” Adyen country manager for Australia and New Zealand, Hayley Fisher said.
“There’s no one 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.”