LexisNexis found that lenders incurred $2.82 in costs, including fees, interest, etc., for every dollar of fraud. The study was based on a survey of 168 risk and fraud executives at lending institutions, including mortgage companies, auto lenders, finance companies, non-bank credit card issuers, and non-bank personal loan issuers.
Among lending companies, large digital lenders with annual revenue of more than $50 million were hit hardest by fraud. These companies paid $3.07 in costs for every dollar of fraud. This compares to $2.63 per dollar of fraud for small and midsized digital lenders and $2.83 per dollar of fraud for lenders with no digital practice.
The study further found that large digital lenders had a higher risk of successful fraud attempts than others. Of 1,959 transactions per month, 26% were successful fraud attempts. Small and midsized digital lenders also face a high 31% success rate out of 413 fraudulent attempts.
"Consumer demand for digital lending is increasing, but it brings with it new fraud risks," said Lucien De Voux, director of digital economy strategy at LexisNexis Risk Solutions. "Identifying the person behind the screen is much harder to do than in person. Lenders operating through digital channels need to adopt a multi-layered approach to prevent identity and transaction fraud."
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The lending industry has seen more damage from fraud than industries such as retail, e-commerce, and financial services, according to the 2017 True Cost of Fraud study on lending released by LexisNexis Risk Solutions.