Truth Behind the Numbers: Decreasing Transaction Fraud Attempts May Be Costing Your Institution More In Losses
Fraud attempts are down! But unfortunately, don’t start celebrating – the dollar value of payments fraud is significantly up, confirming it’s still one of the largest external threats for banks and credit unions. According to a 2022 survey from the Association for Financial Professionals, 71% of the responding banks and credit unions were victims of attempted payment fraud last year.
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The cost of fraud continues to increase, and according to a study by LexisNexis, the value of fraud for U.S. institutions is now upwards of 10% higher than pre-pandemic levels. Behind every instance of fraud are hidden costs beyond the value of the transaction itself. Fees linked to labor and investigations, as well as legal and recovery expenses, each adding up fast, and causing even greater losses for banks and credit unions. Lexis Nexis also reports that for every $1 of fraud loss today, it costs an institution $4, compared to $3.25 in 2019 and $3.64 in 2020.
With expenses like these, it’s no surprise that the banking industry has completely transformed over the last few years, adopting new AI and machine learning-based solutions that try to keep fraud at bay across all points of presentment. In addition to new techniques and bots leveraged by the fraudsters, banks and credit unions must also assess a potential increase in vulnerabilities linked to the adoption of self-service tools, and any risks that may come from banking outside the branch and from behind a screen.
In the end, the difficult reality for banks and credit unions is that fraud can occur at any step in the user journey and from any device or workflow, making it nearly impossible to pinpoint a one-size-fits-all solution to the still growing problem. Addressing the issue is even more complicated, as institutions must balance the total cost of fraud losses with security and protection solutions, all without sacrificing the user experience.
Aside from the financial impact of fraud, vulnerabilities in solutions can impact your institution’s reputation and relationships with account holders. The Financial Brand reports 65% of consumers say data security impacts their trust in their banking providers. Taking the proper measures to secure your transaction ecosystems keeps customers and members safe and loyal to your institution.
Although difficult in a dynamic and constantly changing landscape, it’s important for banks and credit unions to stay ahead of fraudsters by remaining current with software updates and patches and investing in modern solutions with the latest capabilities. Because fraud techniques are constantly evolving, it’s also critical for banks and credit unions to work in partnership with their solution providers and to stay abreast of best practices and new features, including leveraging the latest intelligence from fraud management databases to prevent future attacks.
Alogent’s Day 1 and Day 2 payment platforms, combined with the latest fraud mitigation techniques, secure your deposit channels across all points of capture and the back office, reduce losses, and ensure a consistent and simple UX for your account holders. Combat fraud at the point of presentment and keep your transaction ecosystems secure, protecting your institution and account holders from the latest fraud scams.
Read on for more This article talks further about the role checks play today and why fraudsters see it as a hot opportunity in this blog.
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