LexisNexis has released its fifth True Cost of Fraud study which examines fraud trends for the United States based on the answers of 502 risk and fraud management executives which found that mortgage lenders are especially through online and mobile channels.
According to the survey, the cost of fraud for U.S. financial services and lending firms has increased between 6.7% and 9.9% compared with before the pandemic. To put this another way, for every $1 in fraud in 2021, lenders spend $4.00 to recover it, compared to $3.64 in 2020, and $3.25 in 2019.
The report found that there were three eminent trends in fraud in 2021:
- Surely because of the rise in housing prices, mortgage lenders attracted more fraudsters in 2021 compared to other channels. Mortgage lending fraud costs now 23.5% higher than just before the pandemic hit in early 2020, also more than other channels. Fraudsters are mainly targeting online portals and mobile applications. Every $1 of mortgage lending fraud loss now costs $4.40.
- Due to the relative ease at which fraudsters can scam online applications, financial services and lending firms say that criminals have made this their preferable channel for fraud during the pandemic. More than half of surveyed respondents representing U.S. banks and credit lenders surveyed indicate a 10% or greater increase in mobile channel fraud this year.
- Identification verification continues to be a difficult hurdle to overcome. This aligns with identity fraud representing a significant percent of fraud losses at the point of funds distribution while these losses continue to grow with new account openings.
“The foreseeable future is unclear about the new normal. With the accelerated movement to online/mobile transactions and payments, financial services and lending firms must continue to build out and enhance the digital customer experience while protecting against fraud,” said Christopher Schnieper, Director of Fraud and Identity, LexisNexis Risk Solutions.
“Fraud prevention must assess both physical and digital identity attributes as well as the risk of the transaction. It is difficult for even the best trained professional to detect the increasingly sophisticated crime occurring in the remote digital channels without the aid of solutions that detect digital behaviors, anomalies, device risk and synthetic identities,” Schnieper said. “According to the study, the financial services and lending firms doing this–along with fully integrating cybersecurity operations, the digital customer experience and fraud prevention–tend to have a lower cost of fraud and fewer challenges.”