Identity, Risk Assessments/Management, Vulnerability Management, Security Strategy, Plan, Budget

Financial executives say fraud more pervasive than previously thought

A close-up of hands using a smartphone.
Despite a rise in financial crime, firms are reluctant to institute more inconvenient security controls, according to a new report. (Photo by Justin Sullivan/Getty Images)

It’s well understood that good security is often considered the enemy of convenience, especially in the financial world. Adding new forms of authentication, limitations to privileges, digital walls around databases will provide better protection, but also stymy ease of use, concerned executives have said.

According to new research on financial crime, the pressure of battling the increased and unyielding onslaught of cyberattacks while keeping their services accessible to customers has made U.S. banks feel “trapped between a rock and a hard place.” The report, “The State of Fraud and Financial Crime in the U.S.” was released Sept. 13 by Featurespace, an enterprise financial crime prevention developer, and, a newsletter that follows the payments industry. The report was based on a survey of more than 200 U.S. financial executives at firms with more than $5 billion in assets.

With data that depicts how much financial crime has risen and how much more it is being felt by financial institutions trying to implement solutions and policies to beat back the rising tide, the report overall conveys the description of a financial landscape where U.S. banks feel stuck. Respondents said that their institutions are continuing to see fraud become more pervasive and more expensive, despite their best efforts to mitigate their risks and root out potential fraudsters. But they also expressed apprehension that greater security implementation might gum up the works, and generally present more challenges to offering convenient digital access.

Cases in point: Since last year, more than 3 out of 5 financial institutions (62%) said they have seen an increase in the volume and cost of fraudulent transactions; an even greater percentage of smaller banks, 71%, with $5 billion to $25 billion in assets, reported a jump in financial crime.

“FIs of all sizes are experiencing a significant rise in the total cost of fraud, this is not new," said Carolyn Homberger, president of the Americas for Featurespace, in the company’s release. “However, the fact that fraudsters are increasingly targeting smaller institutions in greater numbers should give all of us in the industry pause.”

Meanwhile, two-thirds (66%) of respondents pointed out that “complex regulatory requirements” have served as a major challenge to their institutions trying new security technologies. Two out of 5 (40%) of financial executives are worried about the complexity of new technologies overall, and concerned that integration between old and new systems may limit their efforts to fight fraud — or create new opportunities for cyber-crooks.

Perhaps most worrisome, more than half (58%) of the financial executives surveyed are concerned that no solution can match the fast-improving sophistication of their attackers, and nearly half (49%) expressed worry that “any system would eventually be overwhelmed by the rising tide of attacks,” according to the report.

Most noteworthy, this research has pointed out “a kind of deadlock when it comes to combating fraud and financial crime,” Holmberger said. “The data — alongside our own experience — shows there’s an appetite for more innovative solutions able to address the ever-increasing challenges posed, yet it appears some institutions continue to wait before taking the leap and benefiting from the significantly reduced fraud losses promised to smart thinking, first movers.”

“It’s a paradox that benefits no-one as much as the criminal,” she concluded, “and impacts no one as much as the consumer who see their confidence, trust and choice diminished further with every attack.”

Get daily email updates

SC Media's daily must-read of the most current and pressing daily news

By clicking the Subscribe button below, you agree to SC Media Terms and Conditions and Privacy Policy.