A fraudulent retail transaction can disappear from view quickly. The merchandise is gone, the payment is disputed and the immediate loss is recorded. But Canadian merchants may be underestimating how much fraud is really costing them.
And the financial toll runs deeper than the initial loss. According to a 2026 LexisNexis study, every $1 of fraud can cost merchants in Canada and in the U.S. an estimated $5.23, up 64 per cent since 2022.
When it comes to chargebacks, the 2026 Chargeback Field Report shows merchants who fight them typically only win about 45 per cent of the time, with a net recovery rate of approximately 18 per cent.
“Fraud costs merchants more than lost sales or merchandise,” says Kris Zanuldin, Head of Konek at Interac. “It drains time, resources and momentum. Every hour spent resolving fraud is time that could be invested in serving customers and growing the business.”
These secondary consequences make the true cost of fraud difficult to measure. The direct financial loss is visible, while hours spent across customer service, payments, fraud management and operations may be less apparent.
The impact can spread quickly across a retail business. Customer-service teams spend time responding to disputes, fraud and payments specialists investigate transactions, while operations or compliance teams may be required to review procedures and documentation. For merchants relying on manual processes, each intervention consumes time that could otherwise be spent serving customers, driving sales or growing the business.
Retailers Are Balancing Convenience and Security
The challenge has intensified as digital commerce has become faster and easier. Consumers expect to create accounts, complete purchases, redeem rewards and request returns seamlessly. Retailers have worked to remove friction because a cumbersome experience can interrupt a sale or send the customer elsewhere.
However, streamlined systems can also create opportunities for bad actors to test credentials, initiate transactions and exploit vulnerabilities at scale. Retailers must assess those attempts while keeping the experience simple for legitimate customers.
Additional rules, manual reviews and authentication requirements can help manage risk, but poorly designed controls can also slow purchases and create frustration.
Fraud Affects Customer Trust
Fraud is also changing consumer behaviour and how Canadians shop and interact with brands online. An Interac survey released in March 2026, found that 53 per cent of Canadians had questioned authentic messages from trusted organizations because fraudulent attempts had become difficult to distinguish from legitimate communications. The same research found that 48 per cent were becoming more cautious about deals, while 47 per cent said they were avoiding unfamiliar retailers altogether.
For merchants, that hesitation can affect customer acquisition and conversion. Shoppers may delay purchases, abandon websites or require greater reassurance before providing payment information. Building trust is especially important for younger consumers, and merchants rank strong security and fraud protection among the top expectations they believe Gen Z consumers have when shopping online, according to a new Interac study 1, based on a survey of 400 Canadian business decision-makers.
Trust has consequently become an important part of the checkout experience. Customers expect convenience along with confidence that the interaction is legitimate and their information is being handled securely.
Merchants need to identify risk without treating every customer as a potential fraudster. The traditional response has often been to detect suspicious activity after it has entered the transaction stream.
A growing opportunity lies in establishing greater confidence earlier in the payment process.
Building Trust Into Payments With Konek
“Retailers shouldn’t have to fight fraud after the fact,” says Zanuldin. “Konek helps build trust right into the payment experience from the start by leveraging the banking relationships Canadians already know and trust.”
Konek is a Canadian digital wallet powered by Interac and backed by Canada’s leading banks. It allows eligible customers to pay online using debit and credit cards, or directly from a bank account.
When a customer chooses Konek at checkout, authentication is provided through their financial institution, helping establish confidence in the transaction before payment is completed. Konek also uses randomized numbers through tokenization, so only necessary data is shared with the merchant to complete a purchase.
Konek also says its payment model can help reduce fraud losses and chargebacks compared with most traditional payment methods because it shifts responsibility for eligible fraud losses from the merchant to the issuer.
More Time for Customers and Growth
Fraud management will remain an essential responsibility for retailers as businesses still require appropriate controls and processes for responding when suspicious activity occurs.
Reducing preventable investigations and disputes, however, can preserve employee capacity for work that contributes directly to customer experience and business performance.
Retailers should examine whether their payment infrastructure establishes greater trust earlier, reducing the amount of time and resources devoted to reacting after fraud occurs.
Canadian merchants can visit Konek.ca to learn more about integrating Konek into their online checkout process.
1 Interac research conducted online by Phase 5 among 400 Canadian businesses (1 to 499 employees) between July 17 and July 31, 2026. Respondents are business decision-makers and were responsible for selecting their organization’s payment solutions. All businesses in the sample currently sell online (or plan to within the next year) and primarily serve customers in Canada.
