The cost of fighting fraud is rising for U.S. banks, with every $1 lost to fraud now costing $4.36 in related expenses such as legal fees and recovery, according to a study published today by LexisNexis Risk Solutions. The software company surveyed 501 fraud and risk executives in banks and other financial institutions in the U.S. and Canada about fraud costs. The average across all U.S. financial institutions surveyed was $4.23 for every $1 lost, a 16.2% increase since a similar survey in 2020.
New account creation is becoming a significant fraud vector among U.S. financial services and lending firms, particularly those dealing with multiple types of scams, according to the survey. New account creation accounted for 36% of fraud losses among U.S. banks in 2022. Scams involving phishing, money mules and wire transfers are driving an increase in digital identity verification challenges at the new account creation stage.
The survey also found increased investment in risk mitigation solutions, particularly digital identity verification (email and phone number risk assessment and verification) and two-factor authentication. In addition, some financial services and lending firms have fully integrated cybersecurity operations, the digital customer experience and fraud prevention.