Lending fraud with small and midsize businesses has increased significantly over the last 12 months, and many financial institutions expect it to get worse, according to a new survey by LexisNexis Risk Solutions. The survey of lenders found the average year-on-year increase in SMB lending fraud was 14.5%, compared to 6.9% in 2021. Nearly three in four respondents expect the problem to get worse over the coming year.
SMB lending fraud losses likely represented as much as 15% of overall losses for the institutions surveyed. The average value of SMB lending fraud losses as a percentage of annual revenue was down slightly at 5.5% compared to 6.2% in 2021, although it remained higher than pre-pandemic levels. The survey noted that SMBs submit more than half of lending applications through online or mobile channels, with a similar proportion of fraud losses attributed to those channels. Still, banks and credit unions reported a small uptick of in-person loan applications and fraud losses as most banks resumed normal in-person operations following the pandemic.