FIs spend almost $3 on every dollar of fraud, study finds

Fraud is becomming a significant drain on revenues for credit unions.

A dollar of fraud costs credit unions and other financial institutions $2.67 in chargebacks, fees, interest and labor, according to a new study by LexisNexis Risk Solutions.

The survey of 185 risk and fraud executives at credit unions, banks, wealth-management companies, trusts and investment firms found that fraud’s price tag is even higher when the institutions have at least $10 million in annual revenue and earn at least 50% of it via online or mobile channels. For them, every dollar of fraud costs $3.04, versus $2.35 for similar institutions that get less than 50% of their revenue from online or mobile channels.

Fraud included misuse of stolen payments methods or personal information, as well as bounced checks and fraudulent requests for refunds or returns. It excludes insider fraud and employee fraud.

“As digital channels become more prevalent, particularly with consumer demand for mobile banking, fraud is a significant drain on financial services companies’ revenues — more than just the value of the fraud itself,” LexisNexis Risk Solutions vice president of fraud and identity management strategy Paul Bjerke said. “These companies need to track and combat fraud effectively to reduce the cost on their business and protect their customers in the new digital age.”

 

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