The findings revealed four key areas of focus:
Approximately 20% of fraud losses for US financial services and lending firms were from third party account takeover, a much lower percentage but still significant.
Identity verification is a top challenge. Study findings show that layering specific digital identity solutions at different journey points can lessen the risk. Unfortunately, no single solution can address all fraud-related issues. A multi-layered solutions approach is best, particularly including those solutions that address the digital identity and transaction risk.
Different combinations of solutions may be required at different stages, such as:
Organizations need real-time transaction tracking tools that allow them to address not only individual identities but also the risk of the transaction and prior behavioral patterns of transaction entities.
Fraud prevention solutions must be able to assess both the physical and digital identity attributes. They must also account for the risk of the transaction. A layered approach allows financial services and lending companies to apply more or less identity authentication efforts based on the risk of the transaction.
Layering in supportive capabilities – such as social media intelligence, AI/ML models, rules-based approaches and crowdsourcing – further strengthens fraud prevention. Study findings indicate that firms following this approach had lower fraud costs: $3.53 vs. $4.20 for those who didn’t.
59% of US banks and 45% of US investment firms used cybersecurity alerts while only 42% of US lending firms used them, choosing instead to rely more heavily on social media intelligence and rules-based approaches.
Finally, the study revealed sizeable familiarity with the Fraud Classifiers model, published by the Federal Reserve to classify fraud related to payments. Just over half of mid/large U.S. and Canadian financial services and lending firms say they use it currently, and many more say they expect to use it within the next 12 months.
Win the Fight Against Fraud
As identity verification becomes more digitally complex, balancing fraud prevention with customer friction is more difficult. Without the assistance of solutions that detect digital behaviors, anomalies, device risk and synthetic identities, financial services and lending companies will find it impossible to uncover the increasingly sophisticated crime occurring in digital channels.
The good news is that the cost of fraud and volume of successful attacks can be mitigated. Financial services and lending firms that invest in the best practice, multi-solutions layered approach and integrate it with cybersecurity and digital experience operations can see a significant reduction in fraud.
Want to learn more? Download the LexisNexis® 2021 True Cost of FraudTM Study Financial Services and Lending Report, U.S. and Canada Edition.