As the holiday season gets underway, banks are bracing themselves for the seasonal influx of fraudulent transactions. While financial institutions are increasingly adopting fraud prevention solutions to stay ahead of fraudsters staying educated about irregular fraud patterns, industry data, and recent security breaches is crucial when defending against holiday fraud and its subsequent operational disruptions.
In the 2022 True Cost of Fraud™ Study by LexisNexis, 502 risk and fraud executives in financial services in the United States were surveyed on navigating the growing risk of fraud. The surveyed financial institutions were able to prevent 1144 fraudulent attacks from occurring but were unable to avert nearly 800 attacks, resulting in a 20.1% increase in the pre-pandemic cost of fraud for banks.
The same study by LexisNexis indicated that every $1 in fraud losses costs U.S. banks $4.36, and friendly/first-party fraud continues to be the driver of these losses. Quavo’s Experts teamed up to put together a guide navigating how issuing financial institutions can make the most of their holidays while maintaining their account holder experience and preventing losses to fraud and disputes.
Account Holder Experience
The holiday season is stressful for account holders and financial institutions alike, and the increase in fraud is a likely denominator. TransUnion’s 2022 Consumer Holiday Shopping Report stated that 54% of consumers are concerned with being victimized by fraud this holiday season. When it comes to fraudulent transactions, account holders depend on their issuing financial institutions to provide support during a time when the customer has been exploited. In turn, FIs are responsible for protecting their cardholders by delivering a seamless and supportive process regarding fraudulent transactions.
Friendly fraud undermines actual fraud victims and costs merchants and issuing institutions valuable resources and revenue. Too often, the front office staff classifies a merchant dispute as fraudulent to appease cardholders. Back-office workers frequently pay fraud cases that do not meet a rigorous burden of proof for denial. In addition, it takes a lot of research and evidence to deny a cardholder for friendly fraud, leaving issuers with a huge bill even if the customer is not committing friendly fraud.
Fraud attack volumes steadily increase during the holidays. The 2022 True Cost of Fraud Study by LexisNexis shows that fraud continues to target mobile channel transactions, with 95% of financial services firms and 96% of lenders saying fraud targeting mobile has increased. Stabilizing unavoidable disruptions within the payments industry can be a tricky skill to master. With natural resource churn, seasonal influxes of fraud, and constant marketplace change, it is difficult to attract, train, and retrain talent within fraud and dispute management. No single source, association, or educational program currently provides training for fraud and dispute management professionals (e.g., analysts, investigators, etc.). Since skills are developed onsite and subject to the opinions of the previous generation, financial organizations struggle not only to find the time and people to train new hires but also to keep training current with the latest technology and regulatory guidelines. Financial institutions can leverage automation to overcome this human capital volatility without replacing jobs but enhancing them.
Consumers want autonomy over their finances but expect a certain degree of customer service that includes support during a time of vulnerability and manipulation, such as fraud on accounts. Institutions can provide this support by adopting an automated fraud management process and staying informed on irregular fraud patterns, industry data, security breaches, and more. Learn how issuers are leveraging automation to prevent operational and financial disruption this holiday season by contacting Quavo’s experts today.