- U.S. investment firms and credit lenders see a 9%
year-over-year increase in the financial impact of
fraud
- Scams comprise 35% of fraud losses for
organizations in North
America
- Fraud makes it more difficult for 79% of
respondents to win consumer trust
ATLANTA, April 24,
2024 /PRNewswire/ -- LexisNexis® Risk Solutions
unveiled the findings of the seventh edition of its
annual LexisNexis® True Cost of Fraud™ Study:
Financial Services and Lending Report — U.S. and Canada
Edition. The report, based on a commissioned study conducted by
Forrester Consulting, reveals 63% of financial firms reported an
overall fraud increase of at least 6% within a
12-month period, with digital channels accounting for half of the
overall fraud losses.
The LexisNexis Fraud Multiplier™ variable increased
for all financial services segments in the U.S. and Canada, with greater increases for firms in
Canada, which now lose nearly an
extra dollar for every $1 of
fraud loss compared to last year: $4.45 in 2023 versus $3.49 in 2022, representing a 28% increase on
average. U.S. investment firms and credit lenders reported a 9%
year-over-year increase, which was notably higher than U.S. banks
and mortgage lenders.
Fraud losses in the phone channel also spiked
across the industry, aligning with widespread increases in scam
attacks and losses due to scams. While these costs to financial
institutions include fines, fees and the effort spent on
investigating fraudulent transactions, they do not factor in the
negative impact on the customer experience of implementing stricter
fraud prevention measures. A significant 79% of
respondents acknowledged a negative impact of fraud on
customer trust.
Organizations encounter thousands of fraudulent transactions
monthly. Fraudsters, seeking to overwhelm companies during the
account creation process, persist in automating criminal activities
with technology, making it increasingly challenging for businesses
to manage the scale and speed of attacks. The unpredictable and
multi-faceted nature of threats compel businesses to adopt a
multi-layered approach to mitigating fraud risk across
the customer journey, or they risk increased financial loss and
customer frustration.
"New forms of fraud elevate the risk of loss for
both financial institutions and their customers," said
Kimberly Sutherland, vice president,
fraud and identity strategy, LexisNexis Risk
Solutions. "Our study shows that organizations are facing
challenges in combatting fraud from international
transactions and scams, despite efforts to educate consumers.
Across industries, geographies and customer journey stages, firms
have implemented more advanced identity authentication and
transaction verification solutions, especially behavioral
intelligence, device identification, physical biometrics and
browser tracking solutions. Firms using a multi-layered, risk-based
solutions approach have a lower cost of fraud and
fewer challenges across each customer journey stage."
Key Findings from the True Cost of Fraud Study™:
Financial Services and Lending
- Increasingly Sophisticated Fraud Methods:
Criminals continuously develop and refine more sophisticated
fraud methods such as scams and synthetic identities
to circumvent anti-fraud tools. Scams now account for
approximately 35% of fraud losses in the U.S. and
Canada, even though almost half
(48%) of financial institutions report undertaking efforts to
educate customers about protecting themselves. Additionally,
synthetic identity fraud is now the most common
fraud type in the financial services sector,
surpassing third-party identity fraud, including
identity theft.
- The Customer Experience: Fraud
significantly affects how customers perceive and interact with
businesses, with more than three-quarters of respondents reporting
that customer satisfaction has been negatively affected. In the
long term, this also results in customer churn and damages
reputation and the company's bottom line.
- Increased Digitalization Creates More Opportunity:
Although approximately two-thirds of revenue comes through remote
channels, physical branches generate the most revenue of any
channel. The use of traditional transaction methods such as cash,
checks and gift cards rebounded, doubling for U.S. firms and more
than tripling in Canada. This
increase reinforces the importance of omnichannel identity
verification and fraud risk assessment
strategies.
- Need for Best Practices: Given the rising threat of
fraud and cybersecurity risks, organizations should
implement a range of integrated fraud solutions that
assess physical identity, digital identity and transaction risk.
This involves:
- Combining a risk-based and data-driven approach to
fraud management
- Balancing fraud management effectiveness and
customer experience
- Leveraging the capabilities of cutting-edge technologies like
artificial intelligence, machine learning and biometric- and
behavior-based authentication methods.
Download the LexisNexis True Cost of Fraud Study:
Financial Services and Lending – 2023.
Methodology: The True Cost of Fraud Study
conducted a survey of 346 risk and fraud executives in
financial services and lending companies in the U.S. (272) and
Canada (74). Data collection and
survey questions reference a 12-month period. The study provides
organizations with data and analysis to understand the current
state of fraud and the challenges associated with
digital payments in emerging markets. This information comes from a
commissioned study conducted by Forrester Consulting on behalf of
LexisNexis Risk Solutions in August
2023.
About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data,
sophisticated analytics platforms and technology solutions to
provide insights that help businesses across multiple
industries and governmental entities reduce risk and improve
decisions to benefit people around the globe. 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
risk.lexisnexis.com and www.relx.com.
Media Contact:
Ade O'Connor
+44 7890 918 264
ade.o'connor@lexisnexisrisk.com
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