back Back

LexisNexis Risk Solutions’ True Cost of Fraud study reveals fraud trends & costs pre & post COVID-19

By Pavithra R

October 14, 2020

  • Canada
  • Lexisnexis Risk Solutions
  • USA
Share

LexisNexis Risk Solutions reveals the true cost of fraud pre & post-COVID-19 Global data and analytics company LexisNexis Risk Solutions has 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 study provides a snapshot of pre and post-COVID-19 lockdown fraud trends and spotlights key pain points for these industries. According to the data, financial services and lending firms of all sizes and types have been negatively impacted by the pandemic. Financial services and lending fraud continue to increase and impact firms, particularly those earning more than $10M in annual revenues. 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 rose 12.8% over the previous reporting period, which covered the first halves of 2018 and 2019 respectively. These losses include transaction face value plus fees and interest incurred, fines and legal fees, labor and investigation costs and external recovery expenses.

Lenders dealt with higher costs than financial services firms. Lenders saw an average of $3.90 in costs for every dollar lost to fraud, up from $3.44, a 13.4% increase. Financial services firms incurred an average of $3.64 cost per dollar of fraud loss, up from $3.25.

“It’s troubling to see the cost of fraud for financial services firms increase year over year, even without COVID-19’s influence. 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,” said Kimberly Sutherland, vice president, fraud and identity management strategy, LexisNexis Risk Solutions.

Fraud trends in financial services and lending include:

  • The COVID-19 Effect: The pandemic has resulted in an increase in volume of attacks among larger institutions, causing a spike in the cost of fraud. This spike however is expected to level off or pull back as firms implement solutions and approaches to adapt to the COVID or post-COVID world. 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 Paycheck Payment Program (PPP) requests.
  • Identity Fraud: Identity-based fraud remains a top contributor to fraud losses. While the overall percentage of reported identity-based fraud remained similar to the previous year, the amount linked to synthetic identity fraud represents 20% of losses this year for mid to large-sized firms.
  • Balancing fraud prevention and customer friction: Identity verification remains a top challenge with online and mobile channel transactions. Non-digital financial services firms find balancing customer friction as a mobile channel challenge.

“The tools to combat fraud need to access multiple aspects of risk associated with consumer account activity and transactions. 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,” added Sutherland.

True Cost of Fraud Study clarifies the three biggest challenges when fortifying risk management strategy, particularly with mobile and international transactions:

  1. Determining the source of transaction origination,
  2. Limited ability to determine geolocation,
  3. Balancing speed of verification with customer friction.

Study findings underscore the value of adding third-party, real-time data and transaction tracking tools.

Established since 1997, Headquartered in Georgia, LexisNexis Risk Solutions provide information-based analytics, decision tools and insights that help businesses and governmental entities reduce risk and improve decisions to benefit people globally. The firm’s client portfolio includes diverse industry verticals including insurance, financial services, healthcare and government.

Previous Article

October 14, 2020

Ternio becomes Visa’s Fast Track enablement partner

Read More
Next Article

October 14, 2020

PayPal launches buy now pay later loans in the UK market

Read More








IBSi Daily News Analysis

cybersecurity

April 18, 2024

Canada

GCC banks bolster Cybersecurity measures to combat email fraud

Read More

IBSi FinTech Journal

  • Most trusted FinTech journal since 1991
  • Digital monthly issue
  • 60+ pages of research, analysis, interviews, opinions, and rankings
  • Global coverage
Subscribe Now

Other Related News

April 19, 2024

Wagestream raises $21.8m to expand financial well-being app

Read More

April 19, 2024

Cashinvoice appoints Vineet Aggarwal as Head of Partnerships & Initiatives

Read More

April 18, 2024

5 RegTech platforms streamlining finance compliance in India

Read More

Related Reports

Sales League Table Report 2023
Know More
Global Digital Banking Vendor & Landscape Report Q1 2024
Global Digital Banking Vendor & Landscape Report Q1 2024
Know More
Wealth Management & Private Banking Systems Report Q1 2024
Wealth Management & Private Banking Systems Report Q1 2024
Know More
IBSi Spectrum Report: Supply Chain Finance Platforms Q4 2023
Know More
Treasury & Capital Markets Systems Report Q1 2024
Know More

IBSi Sales League Table

The industry acknowledged barometer of global banking technology vendor performance!
Get your copy now!
close-link
Get your copy now! IBSi Sales League Table 2023