The True Cost of Fraud: Financial Services and
Lending Finds Buy Now Pay Later, Increased Bots and Mobile Channel
Fraud are Key Concerns for Financial Services and Lending
Firms
ATLANTA, Nov. 16,
2022 /PRNewswire/ -- LexisNexis® Risk Solutions today
released the findings of its 2022 LexisNexis® True Cost of
Fraud™ Study: Financial Services and Lending. This sixth edition of
the report examines current fraud trends for more than 500 United
States and Canadian financial services and lending companies and
highlights key pain points related to the addition of new payment
mechanisms, online and mobile channel transactions and
international expansion. The survey was conducted between May and
July 2022.
U.S. and Canadian financial services firms' fraud costs continue
to rise. Every $1 lost to fraud now
costs U.S. financial services firms $4.23 compared to $3.64 in 2020, a 16.2% increase. The cost for
Canadian financial services firms rose 19.6%, from $3.16 in 2020 to $3.78 in 2022.
The costs for credit and mortgage lending firms remain above
pre-pandemic levels, although they are trending downward after
substantial increases observed at the start of the pandemic.
According to U.S. loan companies, each $1 in fraud losses costs $4.08. Canadian lending firms find that each
$1 in fraud losses actually costs
$3.74.
Key Findings of the True Cost of Fraud Study: Financial
Services and Lending
- Attacks and Costs: Fraud costs and attack volumes for
financial services firms remain significantly higher compared to
before the pandemic. Costs continued to rise above early 2020
levels, with banks reporting the highest figure of $4.36 for every $1
of fraud loss. Mortgage firms also had a comparably higher cost of
$4.20 for every $1 lost to fraud.
- Trends to Watch: Fraudsters targeting mobile
channels, increased bot attacks, various scams and the rapid
adoption of buy now, pay later (BNPL) are causing concern for
financial services and lending firms. Mobile channels now generate
a sizeable level of transaction volume and fraud costs. Banks and
credit lenders are beginning to accept BNPL as a digital payment
method, which respondents indicated represents one-third of the
overall average transaction volume.
- Scams Impacting Customer Journey Risks: Scams are
contributing to increased fraud costs, particularly creating more
risk at the new account creation stage of the consumer journey.
Scams impact fraud detection across consumer touchpoints by
heightening challenges associated with digital identity
verification, distinguishing bots from legitimate customers and
balancing fraud detection with customer friction. Those dealing
with multiple types of scams had a higher cost of fraud based on
more labor/investigation efforts.
- Identity-Related Fraud: Lack of identity
verification is a top challenge that contributes to fraud across
the customer journey. With new account creation still trending
upward, U.S. banks that deal with multiple types of scams
attributed more identity-related fraud to new account creation.
Canadian lending firms and U.S. mortgage lenders saw the biggest
increase in identity-related fraud across account creation, with a
9% rise and 11% rise respectively since 2020.
"It's clear that fraud has become more complex with various
risks occurring simultaneously," said Chris
Schnieper, senior director of fraud and identity strategy,
LexisNexis Risk Solutions. "To minimize fraud, organizations can no
longer rely on manual processes or point solutions to reduce fraud,
manual reviews and costs. Firms using a multi-layered solutions
approach that integrates identity verification and authentication
within digital consumer experience can lower their cost and volume
of successful fraud. This approach improves identity verification
and fraud detection effectiveness and lowers friction for trusted
consumers."
Methodology
The report's findings stem from a survey of financial services
and lending companies. The 426 U.S. and 76
Canadian respondents consisted of risk and fraud management
executives in retail and commercial banks, credit unions, trusts
and wealth management along with auto lenders, mortgage companies,
finance companies and non-bank credit card and personal loan
issuers.
The LexisNexis Fraud Multiplier™
The cost of fraud is more than the actual dollar value of a
fraudulent transaction. It includes additional costs related to
labor/investigation, fees incurred during the
applications/underwriting/processing stages, legal fees and
external recovery expenses. The LexisNexis Fraud Multiplier
determines the actual cost of fraud based on calculating these
additional costs.
Download a copy of the LexisNexis® True Cost of Fraud™ Study:
Financial Services and Lending Report.
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. For more information, please visit
www.risk.lexisnexis.com and www.relx.com.
Media Contact:
Marcy
Theobald
678.232.0948
Marcy.Theobald@lexisnexisrisk.com
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