LexisNexis® Risk Solutions has been tracking the true cost of fraud for more than 10 years. The LexisNexis® Risk Solutions 2020 True Cost of FraudTM Study Financial Services & Lending Report edition explores the:
According to the data, financial services and lending firms of all sizes and types have been negatively impacted by the COVID-19 pandemic. Average monthly fraud attacks increased overall. And what’s even more disturbing is that more of those attacks were successful than ever before.
Larger banks and lenders saw the most significant increases in successful attacks since the COVID-19 pandemic began compared to before this period. That rise in attacks is on top of a trend that was already trending upward.
Larger digital firms that conduct the majority of transactions remotely (online or mobile channels) experienced higher average monthly attack volumes than others since the start of the pandemic. Mid/large digital financial firms saw an increase of 39.48% in successful attack since before the shutdown, while mid/large digital lending firms experienced a 27.56% increase.
The study clearly reveals that small and large, as well as digital and non-digital, financial services and lending firms have all been hurt by the increase in fraud fueled by the pandemic.
In addition to higher volumes of fraud, comes another disturbing trend—an increase in the cost of fraud. The cost of fraud pre-COVID-19 among U.S. financial services and lending firms continues to rise 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 now incur an average of $3.78 in costs, up from $3.35 since 2019.
The rise in fraud costs since the start of the pandemic largely results from an increase with internal labor and/or external support to detect, investigate and recover losses–particularly for those handling PPP loan requests.
Criminals are getting smarter and new technologies make it easier for them to circumvent current risk management processes, according to the True Cost of Fraud Study.
The issues that weigh on these financial firms generally center around revenue loss, the inability to stay ahead of emerging fraud risks and the pressure to provide seamless digital experiences.
The pandemic and brick-and-mortar shutdown came suddenly, shifting more transactions to online and mobile channels for every type and size of organization. Firms (digital, non-digital, large and small) that had not yet invested in these digital/remote channel risk mitigation solutions were caught off-guard and challenged when using traditional solutions that focus more on the physical identity attributes.
True Cost of Fraud Study covers a lot of ground, but it also clarifies the three biggest challenges as you fortify your risk management strategy, particularly with mobile and international transactions:
Study findings underscore the value of adding third-party, real-time data and transaction tracking tools.
There’s also a need to employ more digital identity and behavior data and analysis to overcome the complexities of “faceless” digital channels.
Balance is key: Best results come from a multilayered approach incorporating different levels of authentication and verification appropriate to the potential risk of the transaction. The toolset should include advanced identity verification and risk assessment solutions that understand the nuances unique to digital and physical channels.
Get caught up on the latest information in financial services and lending fraud and download the study now.
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