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Fraud costs merchants in the United States $4.61 for every $1 of fraud incurred, up 32% from $3.16 in 2022, according to LexisNexis Risk Solutions’ annual True Cost of Fraud Study. In Canada, fraud costs merchants $4.52 for every $1 of fraud incurred.
Driving the increase is that criminals are attacking merchants from more entry points than ever before, not just at checkout. Attack points include account takeovers and synthetic identities to open customer accounts.
“Criminals are becoming more creative when it comes to finding and exploiting weakness when it comes to fraud prevention and are attacking merchants across the entire customer journey, not just during payment,” says Maanas Godugunur, senior director, fraud and identity for LexisNexis Risk Solutions. “The more attack vectors used, the harder it becomes to detect fraud.”
LexisNexis surveyed 569 fraud and risk executives in the U.S. and Canada in late 2024 and early 2025. The company is using 2022 data as a benchmark for its current report as it reverts back to the same reporting methodology used in 2022, after altering methodology in 2024.
To get a deeper understanding of fraud costs for merchants, LexisNexis added several new data points for its 2025 study, such as legal fees incurred during a fraud loss, new chargeback reporting rules for merchants, merchants’ addition of new payment methods, and customer-acquisition and retention costs.
These new categories are helping merchants get a deeper and better understanding of the effect of fraud across their entire business, Godugunur says.
Mobile transactions, peer-to-peer payments, and QR codes are among the biggest drivers of fraud costs for merchants, accounting for 33% of expenses in the U.S. and 41% in Canada.
When adding a new payment method, merchants should be thinking about how it will impact their fraud costs and what vulnerabilities the payment option may create, the report advises. “Merchants should be asking whether they already have the processes in place to control fraud around a new payment method and whether they can be effectively applied to new payment methods,” says Godugunur. “This should be part of their evaluation criteria.”
Monetary losses are not the only fallout from fraud. Customer churn is also a problem, with 63% of respondents saying fraud has led to customer churn. In addition, 64% of respondents say fraud hurts customer-conversion rates.
Friction from manual fraud-detection processes is a major culprit for customer churn, with 59% of respondents citing friction as the reason for churn. “Manual detection leads to a lot of friction, when friction should only be added when needed,” says Godugunur.
Manual fraud-detection processes remain deeply embedded among merchants in the U.S. and Canada, with 41% of respondents saying they depend on them. The reasons merchants are slow to adopt automated technologies, such as artificial intelligence, boil down to a lack of resources.
Just 6% of e-commerce merchants in the U.S. and 3% of e-commerce merchants in Canada have fully automated fraud prevention, the study says.
“Merchants need a data analyst, an integration specialist, and other hires to operate automated fraud detection solutions, and they don’t always have the resources to implement them all at once,” Godugunur says. “One of the things we are trying to do is educate the merchant community on how to work through this transition.” Overly strict fraud prevention can result in a poor customer experience that leads to lost sales and customer churn. In the U.S., 36% of retailers and 37% of e-commerce merchants cite a poor user experience as the primary driver of abandonment during account creation.
