The last decade has seen a steady rise in data breaches, identity theft, account takeovers and money laundering. Financial fraud collectively costs businesses, banks and consumers $3.5 trillion each year, according to a 2012 study by the Association of Certified Fraud Examiners. That is the equivalent of 5% of the world's gross domestic product.

Alarming as that figure is, financial fraud comes with an even greater and often-overlooked cost: the loss of trust.

Industry observers who view fraud as part of the cost of doing business are missing the point. Financial losses can be managed and controlled. Shortfalls in consumer confidence in the financial ecosystem undermine the very protections that regulators and financial institutions have spent years building.

As we've seen in recent years, when consumers lose confidence in the financial services industry, they migrate away from traditional payment solutions toward new — and often higher-risk — alternatives. Ironically, many of the alternatives that some consumers are now embracing, including social media exchanges and non-bank mobile payment apps, lack the very regulatory safeguards and oversight that were put into place to reinforce trust in the payment and banking system.

Meanwhile, the financial services industry often finds itself caught in a tug-of-war between convenience and security. Today's younger consumers expect faster, more streamlined online and mobile services without pesky extra steps. A 2012 survey found that 62 percent of younger bank customers rated the ease and speed of transactions as more important than security concerns. Yet the financial services industry is well aware of the magnitude and sophistication of security threats as well as the damage that identity thieves and fraudsters can inflict on our customers.

As a result, it is up to the financial services industry to create new methods of identification, authentication and privacy protections that ensure consumer inconvenience is kept to a minimum.  Consider the hefty out-of-pocket costs that consumers shoulder when they elect to purchase credit monitoring, identity theft protection and password-management software. Consider also the inconvenience they endure as they juggle increasingly convoluted passwords and try to answer cryptic security questions, along with the general anxiety they experience with each newly-announced data breach. Our industry can proactively counter these inconveniences and stress by taking immediate steps to institute single sign-on and authentication procedures.

Legacy identification and authentication factors made sense in the world of face-to-face and local transactions. But they are ineffective in today's mobile and digital environment, where most financial interaction takes place in an anonymous, real-time and global environment.

By working together and deploying a collaborative, intelligent and consumer-friendly model for solving our digital vulnerabilities, our industry will be more aligned with a model of cybersecurity and privacy that supports consumer confidence and convenience. In 2011, the White House took a bold step in protecting trust when it launched the National Strategy for Trusted Identities in Cyberspace.  I was an early participant in this process and saw the value of its goal of creating an interoperable and secure identification system to promote a trust across an expanding landscape of digital transactions.

Now it's time for the financial services industry to manifest this vision. Our industry can enable a safer and faster payment ecosystem. As more transactions are conducted digitally, I'm encouraged by how much I see U.S. banks making the investments needed to solve the legacy gaps in identity and authentication systems and, in so doing, fortifying that trust in our system for generations to come.

Frank Caruana is chief marketing officer for Early Warning and has more than 25 years of executive experience in the financial services and identity protection industries.