LexisNexis Risk Solutions Annual Report Reveals Fraud Costs Up to 22.4% Over Pre-Pandemic Levels Across U.S. and Canadian Financial Services Firms

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The true cost of fraud: financial services and lending found Buy now, pay later, the rise of bots and fraud on mobile channels are major concerns for financial services and lending companies

ATLANTE, November 16, 2022 /PRNewswire/ — LexisNexis® Risk Solutions today released findings from its LexisNexis® True Cost of Fraud™ 2022: Financial Services and Lending study. This sixth edition of the report examines current fraud trends for more than 500 financial services and lending companies in the United States and Canada and highlights key pain points related to the addition of new payment mechanisms, online and mobile transactions and international expansion. The survey was conducted between May and July 2022.

Fraud costs for US and Canadian financial services companies continue to rise. All $1 lost to fraud now costs U.S. financial services firms $4.23 compared to $3.64 in 2020, an increase of 16.2%. The cost to Canadian financial services businesses increased by 19.6%, from $3.16 in 2020 for $3.78 in 2022.

Costs for credit and mortgage companies remain above pre-pandemic levels, although they are trending lower after the substantial increases seen at the start of the pandemic. According to American loan companies, each $1 in costs of losses due to fraud $4.08. Canadian loan companies find that every $1 in fraud-related losses actually costs $3.74.

Key Findings from the Real Cost of Fraud Study: Financial Services and Loans

  • Attacks and Costs: Fraud costs and attack volumes for financial services firms remain significantly higher than before the pandemic. Costs continued to rise above early 2020 levels, with banks reporting the highest figure of $4.36 for each $1 loss due to fraud. Mortgage companies also had a comparatively higher cost of $4.20 for each $1 lost due to fraud.
  • Trends to watch: Fraudsters targeting mobile channels, the increase in bot attacks, various scams and the rapid adoption of buy now, pay later (BNPL) are worrying financial services and lending companies. Mobile channels now generate a significant level of transaction volume and fraud costs. Banks and lenders are beginning to accept BNPL as a digital payment method, which respondents said accounts for a third of the global average transaction volume.
  • Scams impacting customer journey risk: Scams contribute to increased fraud costs, particularly by creating more risk at the new account creation stage of the consumer journey. Scams impact fraud detection across all consumer touchpoints by increasing challenges associated with digital identity verification, distinguishing bots from legitimate customers, and balancing fraud detection with friction with customers. People facing multiple types of scams had a higher cost of fraud due to more labor/investigative effort.
  • Identity Fraud: Lack of identity verification is a major challenge that contributes to fraud throughout the customer journey. With new account creation still on the rise, US banks that handle multiple types of scams have attributed more identity fraud to new account creation. Canadian loan companies and U.S. mortgage lenders have seen the largest increase in identity fraud when creating accounts, with increases of 9% and 11% respectively since 2020.

“It is clear that fraud has become more complex with various risks occurring simultaneously,” said Chris Schnieper, Senior Director of Identity and Fraud 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. Companies using a multi-layered solutions approach that integrates verification and authentication of the “identity in consumers’ digital experience can reduce their costs and volume of successful fraud. This approach improves the efficiency of identity verification and fraud detection and reduces friction for trusted consumers.”

Methodology

The report’s findings stem from a survey of financial services and lending companies. The 426 U.S. respondents and 76 Canadian respondents were risk and fraud management executives at retail and commercial banks, credit unions, trusts and wealth managers, as well as auto lenders, loan companies mortgages, finance companies and non-bank issuers of credit cards and personal loans.

The LexisNexis™ Fraud Multiplier

The cost of fraud is greater than the actual monetary value of a fraudulent transaction. It includes additional labor/investigation costs, costs incurred during the application/underwriting/processing stages, legal fees and external collection costs. The LexisNexis Fraud Multiplier determines the actual cost of fraud based on the calculation of these additional costs.

Download a copy of 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 deliver insights that help businesses and government entities reduce risk and improve decisions for the benefit of people everywhere. We provide data and technology solutions for a wide range of industries, including insurance, financial services, healthcare and government. Based in the Atlanta metro area, Georgia, we have offices around the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information-based analytics and decision-making tools for professionals and enterprises. For more information, please visit www.risk.lexisnexis.com and www.relx.com.

Media Contact:
Marcy Theobald
678.232.0948
[email protected]

SOURCE LexisNexis Risk Solutions

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