A closely watched measure of fraud costs found each dollar lost to fraud attacks in 2021 cost U.S. banks and other financial services firms $4.23, up more than 16 percent from 2020. Each year for the last 13 years, LexisNexis Risk Solutions (LNRS) has used a proprietary formula to calculate a multiplier that estimates how much fraud actually costs organizations over and above the value of the fraudulent transaction. The multiplier includes inputs like restocking, chargebacks and other fees associated with fraud.
Recently, LNRS has released versions of its True Cost of Fraud Report for various verticals. For financial services, fraud had remained significantly higher since the pandemic, the report said, with banks being the most targeted type of financial services firm.
“It’s clear that fraud has become more complex with various risks occurring simultaneously,” said Chris Schnieper, senior director of fraud and identity strategy for LexisNexis Risk Solutions. “To minimize fraud, organizations can no longer rely on manual processes or point solutions to reduce fraud, manual reviews and costs. Firms using a multi-layered solution approach that integrates identity verification and authentication within digital consumer experience can lower their cost and volume of successful fraud. This approach improves identity verification and fraud detection effectiveness and lowers friction for trusted consumers.”
Trends uncovered by the study affecting financial services businesses include increased targeting of mobile channels, increased bot attacks, and bad actors leveraging the rapid adoption of buy now, pay later (BNPL). Banks and credit lenders are beginning to accept BNPL as a digital payment method, which respondents indicated represents one-third of the overall average transaction volume.