Credit card fraud isn’t just on the rise—it’s skyrocketing to unprecedented levels, putting retailers across the nation at risk, according to a new data from the Federal Trade Commission (FTC) and report from BackgroundChecks.org.

In fact, since 2019 pre-pandemic levels, credit card fraud reports have surged a staggering 62% through 2022. And fraud isn’t slowing down in 2023 either. Over the first three quarters of this year, fraud reports remain elevated well above 2019 rates.

For retailers, this surge in fraud presents serious financial threats and security challenges. As fraud rises, retailers bear the brunt through costly chargebacks and fines for non-compliance. Preventing fraud requires advanced security measures that strain retailer resources.

But exactly how much has fraud increased, and which retailers are most at risk? Our analysis provides insight into the rapidly changing fraud landscape to help retailers guard against emerging threats.

Fraud Skyrockets During the Pandemic

The pandemic brought profound shifts in consumer behavior as spending rapidly moved online. Digital commerce surged 44% from 2019 to 2021, reaching over $1 trillion for the first time.

Unfortunately, fraudsters seized the opportunity presented by this sudden shift. As consumers flocked online, criminals followed suit and fraud spiked dramatically higher.

• 62% increase in credit card fraud reports from 2019 to 2022
• Over 318,000 credit card fraud reports in just the first three quarters of 2023

The ease of accessing consumers’ credit card information via ecommerce transactions allowed criminals to perpetrate fraud at unprecedented levels. Retailers were caught off guard by new types of fraud enabled by the digital space.

For example, account takeovers surged where hackers stole user credentials and made unauthorized purchases with existing credit cards. As consumers saved payment information online, it became increasingly easy for fraudsters to access this data.

Young Consumers Are Most at Risk

The shift to digital transactions also reshaped the demographics being targeted by criminals. Younger, digitally savvy consumers now find themselves most at risk.

• 30 to 39-year-olds account for nearly 1/3 of all credit card fraud victims
• 20 to 29-year-olds also overindex in fraud complaints

Younger consumers have enthusiastically adopted online shopping and digital payments. Over 75% of millennials prefer shopping online, compared to just 40% of baby boomers.

With younger consumers now driving the bulk of ecommerce transactions, they present prime targets for fraudsters. Retailers catering to these demographics face heightened risks from fraud targeting their core customer base.

Tourism Hotspots See Massive Fraud Spikes

Some geographic regions have been hit especially hard by surging fraud. Popular tourist destinations saw massive spikes as criminals targeted vacation travelers.

The top metro areas for fraud complaints all align with major tourism hot spots:

1. Miami/Fort Lauderdale, FL
2. Atlanta, GA
3. Los Angeles, CA
4. Las Vegas, NV
5. Orlando, FL

Miami tops the list with a staggering 20,000+ fraud complaints in 2023 alone. Criminals likely target tourists, who may be less likely to monitor accounts while traveling away from home.

For retailers operating shops, restaurants, hotels, and entertainment in tourist-heavy regions, risks have skyrocketed in tandem with escalating fraud rates. Without proper precautions, these merchants face substantial financial liability from fraud losses and chargebacks.

Steps Retailers Must Take to Combat Fraud

As risks intensify, retailers must take proactive action to guard against surging fraud threats:

Monitor fraud analytics carefully — Watch for spikes in fraud attempts, especially account takeovers, which have become more common. Use data to identify weak points.

Screen transactions with AI and machine learning — Advanced analytics can detect suspicious activity in real time, stopping criminals in their tracks.

Utilize tokenization — Tokenizing credit card data secures information, protecting retailers and consumers alike from data breaches targeting payment info.

Verify identities — Tools like two-factor authentication and biometrics confirm user identities before allowing access to accounts or payments.

Frequently update fraud prevention measures — As criminals evolve tactics, so must defenses. Ensure fraud protocols are flexible and up-to-date.

Track compliance — Follow standard compliance procedures around securing payment data to avoid heavy fines for preventable breaches.

Educate employees — Train staff to recognize signs of fraud and enforce security best practices across the organization.

As risks intensify, a comprehensive and layered fraud strategy is essential for retailers. The stakes have risen considerably, but proactive precautions can help merchants protect profits and customer loyalty in the face of surging threats.