Going more digital? Expect more fraud
Fraudsters have been around from time immemorial, but the digital revolution is leaving banks more exposed to criminal deceit.
A new survey of financial industry executives finds that companies that derive most of their revenue from online and mobile channels have substantially higher fraud costs than do similarly sized companies that rely less on the internet.
At firms with at least $10 million in annual revenue, at least half of which comes through digital channels, fraud costs account for 2.79% of revenue, according to the survey. That compares with 2.04% at companies that are in the same size bracket but collect less than half of their revenue from digital channels.
The survey of 185 executives from banks, credit unions and other financial services companies was conducted by LexisNexis Risk Solutions.
It found that fewer than one in seven fraud attempts were successful at the less digitally focused companies, compared with more than one in five attempts at the firms that rely more on online and mobile channels.
Transactions initiated on mobile phone browsers were identified as a particular area of vulnerability. At the banks that were surveyed, web browsers accounted for 35% of mobile transactions but 44% of mobile fraud.
The survey suggests that many financial services companies are not doing an adequate job of tracking which fraud attempts are successful and which are not.
“Fraudsters are adept at learning what works and what doesn’t. When organizations start to prevent fraud by one means, fraudsters move to other approaches. But where less tracking leads to less prevention, then fraudsters will continue with current entry points,” LexisNexis Risk Solutions said in a report summarizing its findings.
The survey’s authors said that their findings highlight the need for banks and other financial services companies to implement a full arsenal of fraud prevention tools.
“It is very likely that the volume of digital transactions will only grow over time, particularly through the mobile channel,” the report stated. “The pain points and higher fraud costs experienced by these firms should increase accordingly.”