LexisNexis Risk Solutions today released the 2021 edition of the LexisNexis True Cost of Fraud Study: Financial Services & Lending. The study examines United States and Canada financial services and lending sectors as well as key pain points related to adding new payment mechanisms. This includes transactions occurring online as well as through mobile channels and international expansion.
This edition is based on responses from more than 500 risk and fraud management executives in August and September 2021 and reveals that fraud costs and attack volumes remain significantly higher compared to before the pandemic.
The cost for U.S. financial services and lending firms increased between 6.7% and 9.9% compared to before the pandemic. Every $1 in fraud loss costs U.S. financial firms $4.00, compared to $3.25 in 2019 and $3.64 in 2020. The LexisNexis Fraud Multiplier for U.S. lenders is now $4.16, compared to $3.90 in early 2020 and up 12.4% prior to the pandemic.
Mortgage lenders in particular have been seriously impacted by fraud. Mortgage lending fraud now costs 23.5% more than it did just before the pandemic hit in 2020. Attacks on larger mortgage lenders have increased in recent years, mainly among those originating loans through online and mobile channels. Although slightly down from the beginning of the pandemic, every $1 of mortgage lending fraud loss costs $4.40.
Mobile channels are continuously targeted. As more banks and mortgage lenders conduct transactions through mobile channels, these firms have to attribute more of their fraud costs to it. According to the study, more than half of respondents representing U.S. banks and credit lenders surveyed indicate a 10% or greater increase in mobile channel fraud this year.
Additionally, there is a significant percentage rise across lending services and financial firms for malicious bot transactions. These bots may be difficult to spot without support with digital identity and transaction fraud detection solutions.
Identity verification is a top challenge considering identity fraud represents a significant percentage of fraud losses at the point of funds distribution. Banks struggle with fraud detection when handling new account openings and account logins. Identifying malicious bots and transaction origination a main concern at funds distribution.
Mortgage lenders rank fraud detection with customer friction, identifying malicious bots, and knowing the transaction elimination as top challenges across the customer journey. They are also more likely to have a lack of tools to detect and prevent cross border fraud, especially with account takeover.
"The foreseeable future is unclear about the new normal. With the accelerated movement to online/mobile transactions and payments, financial services and lending firms must continue to build out and enhance the digital customer experience while protecting against fraud," said Christopher Schnieper, director of fraud and identity, LexisNexis Risk Solutions.
"The foreseeable future is unclear about the new normal. With the accelerated movement to online/mobile transactions and payments, financial services and lending firms must continue to build out and enhance the digital customer experience while protecting against fraud," said Christopher Schnieper, director of fraud and identity, LexisNexis Risk Solutions.
