ATLANTA, Oct. 13, 2020 /PRNewswire/ -- LexisNexis® Risk
Solutions today released its LexisNexis Risk Solutions 2020
True Cost of Fraud™ Study: Financial Services & Lending for
the United States and Canadian
financial services and lending sectors. The research provides a
snapshot of pre and post-COVID-19 lockdown fraud trends and
spotlights key pain points for these industries. The study
reveals that financial services and lending fraud continues to
increase and impact firms, particularly those earning more than
$10 million in annual
revenues.
The cost of fraud pre-COVID-19 among U.S. financial services and
lending firms rose 12.8% over the previous reporting period, which
covered the first halves of 2018 and 2019 respectively. For every
dollar of fraud lost in the pre-COVID period, U.S. financial
services and lending companies incurred an average of $3.78 in costs, up from $3.35 since the last edition of the survey. These
losses include the transaction face value for which firms are held
liable, plus fees and interest incurred, fines and legal fees,
labor and investigation costs and external recovery expenses.
Lenders continue to have somewhat higher costs than financial
services firms. Lenders alone see an average of $3.90 in costs for every dollar lost to fraud, up
from $3.44, a 13.4% increase.
Financial services firms incur an average of $3.64 cost per dollar of fraud loss, up from
$3.25. This is the first year that
Canadian firms participated in the survey: Canadian financial
services and lending companies realize an average of $3.46 in costs for every dollar lost to
fraud.
Fraud Trends in Financial Services and Lending
- The COVID-19 Effect – The COVID-19 pandemic has had a
significantly negative impact on financial services and lending
firms. The volume of successful attacks has risen across segments
during COVID-19, most dramatically among larger institutions,
causing a spike in the cost of fraud. However, the spike may level
off or pull back at some point as firms further implement solutions
and approaches to adapt to the COVID or post-COVID world.
Both digital and non-digital firms have felt the negative impact of
the pandemic, particularly banks and credit lenders that processed
Paycheck Payment Program (PPP) applications. The rise in costs
largely results from an increase in internal labor and/or external
support to detect, investigate and recover losses, particularly for
those handling PPP requests.
- Identity Fraud a Top Factor – Identity-based fraud
remains a top contributor to fraud losses. While the overall
percentage of reported identity-based fraud has remained similar to
the previous period, the amount linked to synthetic identity fraud
represents 20% of losses this year for mid to large-sized
firms.
Account-based fraud remains the top identity-related fraud
activity, particularly account takeover. However, the portion
attributed to fraudulent new account creation has increased. This
could be a result of increased cell phone account fraud.
- Balancing Fraud Prevention and Customer Friction –
Identity verification remains a top challenge with online and
mobile channel transactions. Both digital and non-digital firms
consider digital identity verification of email, device and phone
number data as a particularly increasing challenge.
Non-digital financial services firms that have less investment in
digital-based risk mitigation solutions uniquely designed to
balance fraud prevention with minimizing customer friction
increasingly view balancing customer friction as a mobile channel
challenge.
"It's troubling to see the cost of fraud for financial services
firms increase year over year, even without COVID-19's influence,"
said Kimberly Sutherland, vice
president, fraud and identity management strategy, LexisNexis Risk
Solutions. "Fraud is more complex than ever with various risks
occurring simultaneously. If financial services and lending
firms want to remain proactive in protecting their environment
against fraudulent activity, they should constantly evaluate their
defensive posture then adjust accordingly.
"The tools to combat fraud need to access multiple aspects of
risk associated with consumer account activity and transactions,"
Sutherland continued. "The combination of physical and digital
identity analysis is essential and a multi-layered solution
approach has proven to be most effective for fighting fraud across
various channels and transaction types. In the end this approach
leads to appropriate levels of friction throughout the customer
journey."
The report's findings stem from a comprehensive survey of 500
risk and fraud executives in financial services and lending
companies, including retail and commercial banks, credit unions,
investments, trusts and wealth management, as well as auto lenders,
mortgage companies, finance companies, and non-bank credit card and
personal loan issuers.
Download the LexisNexis® Risk Solutions 2020 True Cost of Fraud™
Study: Financial Services & Lending.
About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data and advanced
analytics to provide insights that help businesses and governmental
entities reduce risk and improve decisions to benefit people around
the globe. We provide data and technology solutions for a wide
range of industries including insurance, financial services,
healthcare and government. Headquartered in metro Atlanta, Georgia, we have offices throughout
the world and are part of RELX (LSE: REL/NYSE: RELX), a global
provider of information-based analytics and decision tools for
professional and business customers across industries. For more
information, please visit www.risk.lexisnexis.com and
www.relx.com.
Media Contact:
Marcy
Theobald
678.694.6681
Marcy.Theobald@lexisnexisrisk.com
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