Costs are going up, from buying a house, to getting a mortgage, to picking up a gallon of milk.
You can add the cost of fraud to the list.
According to LexisNexis Risk Solutions 2022 True Cost of Fraud Study, for every $1 lost to fraud at financial institutions, it costs $4.23 to address it, an increase of 16.2% from 2020. At mortgage firms the cost was $4.20; at banks the cost was $4.36.
Overall, the cost is up almost 20% in the U.S., according to the study.
The cost of fraud is related to labor and investigation, and fees incurred during the application/underwriting/processing stages, legal fees, and external recovery expenses.
The study also found that fraud attack volume continues to rise as criminals use stolen or fake identification to open new accounts. For mortgage institutions, application fraud through direct-to-consumer transactions was also an issue.
The study, which surveyed about 500 risk and fraud executives in financial and lending companies in the U.S. and Canada, did not include insider or employee fraud.
The study recommended several solutions, including:
- identity proofing;
- adopting a multilayered solutions approach customized to each phase of the customer journey and transaction channel;
- mitigating fraud by protecting end-points and using digital identity and behavioral analytics that assess risk while minimizing friction;
- using technologies that recognize customers, determine their point of access, and distinguish them from fraudsters and malicious bots; and
- adding transaction risk technology to the layering of the digital attributes, behavioral analytics, and device assessment solutions during the transaction distribution of funds journey point.
Dawn Hill, director of real estate fraud and identity strategy at LexisNexis Risk Solutions, said in an interview that online and other mobile transactions are expected to increase.
“Lenders need to focus on finding it up front. You spend money at the application stage,” she said, adding that it could be something as simple as checking how long an email address has been in existence.
The study also found that full integration of cybersecurity operations with fraud prevention efforts is continuing to increase. Since 2020, full integration at financial services institutions has increased from 28% to 45%, and at lending institutions that number has increased from 33% to 49%.