Study finds fraud costs increase from pre-pandemic levels
U.S. and Canadian financial services firms’ fraud costs continue to rise. Every $1 lost to fraud currently costs U.S. financial services firms $4.23 compared to $3.64 in 2020, a 16.2% increase. The cost for Canadian financial services firms rose 19.6%, from $3.16 in 2020 to $3.78 in 2022.
According to the study conducted by LexisNexis, the costs for credit and mortgage lending firms also remain above pre-pandemic levels, although they are trending downward after substantial increases observed at the start of the pandemic. U.S. loan companies report that for every $1 in fraud losses costs $4.08. Canadian lending firms find that each $1 in fraud losses actually costs $3.74.
Chris Schnieper, senior director of fraud and identity strategy for LexisNexis, said, “It’s clear that fraud has become more complex with various risks occurring simultaneously. To minimize fraud, organizations can no longer rely on manual processes or point solutions to reduce fraud, manual reviews and costs.”
Key findings from the study:
- Attacks and costs: Fraud costs and attack volumes for financial services firms remain significantly higher compared to before the pandemic. Costs continued to rise above early 2020 levels, with banks reporting the highest figure of $4.36 for every $1 of fraud loss. Mortgage firms also had a comparably higher cost of $4.20 for every $1 lost to fraud.
- Trends to watch: Fraudsters targeting mobile channels, increased bot attacks, various scams and the rapid adoption of buy now, pay later (BNPL) are causing concern for financial services and lending firms.
- Scams impacting customer journey risks: Scams are contributing to increased fraud costs, particularly creating more risk at the new account creation stage of the consumer journey.
- Identity-related fraud: Lack of identity verification is a top challenge that contributes to fraud across the customer journey.