Small and Midsize Business Lending Fraud Rises Over the Past Year, with Lenders Anticipating Further Increases in the Year Ahead
LexisNexis Risk Solutions' latest study reveals a significant increase in small and medium-sized business (SMB) lending fraud, with over 80% of respondents reporting a nearly 14% rise over the past year. Key findings include:
1. Stolen legitimate business and consumer/owner identities are the most common fraud types.
2. 70% of organizations have adjusted their fraud detection strategies.
3. Companies anticipate overall losses between 6% and 10%, with 17% due to reduced friction in approval processes.
4. There's a shift towards tech-driven fraud prevention, including advanced identity solutions.
The study recommends enhancing identity proofing, adopting a multi-layered approach, focusing on early-stage fraud detection, and sharing intelligence through consortiums to combat SMB lending fraud effectively.
Il recente studio di LexisNexis Risk Solutions rivela un aumento significativo delle frodi nel prestito alle piccole e medie imprese (PMI), con oltre l'80% dei rispondenti che segnalano un aumento di quasi il 14% nell'ultimo anno. I principali risultati includono:
1. Le identità rubate di aziende legittime e di consumatori/proprietari sono i tipi di frodi più comuni.
2. Il 70% delle organizzazioni ha modificato le proprie strategie di rilevamento delle frodi.
3. Le aziende prevedono perdite complessive tra il 6% e il 10%, con il 17% dovuto a una riduzione delle difficoltà nei processi di approvazione.
4. C'è un passaggio verso una prevenzione delle frodi guidata dalla tecnologia, inclusi soluzioni avanzate per l'identità.
Lo studio raccomanda di migliorare la verifica dell'identità, adottare un approccio multilivello, concentrarsi sulla rilevazione precoce delle frodi e condividere informazioni attraverso consorzi per combattere efficacemente le frodi nel prestito alle PMI.
El último estudio de LexisNexis Risk Solutions revela un aumento significativo del fraude en préstamos a pequeñas y medianas empresas (PYME), con más del 80% de los encuestados reportando un aumento de casi el 14% en el último año. Los hallazgos clave incluyen:
1. Las identidades robadas de empresas legítimas y de consumidores/propietarios son los tipos de fraude más comunes.
2. El 70% de las organizaciones han ajustado sus estrategias de detección de fraude.
3. Las empresas prevén pérdidas generales entre el 6% y el 10%, con un 17% debido a la reducción de fricciones en los procesos de aprobación.
4. Hay un cambio hacia la prevención de fraudes impulsada por la tecnología, incluida soluciones avanzadas de identidad.
El estudio recomienda mejorar la verificación de identidad, adoptar un enfoque de múltiples capas, centrarse en la detección temprana de fraudes y compartir inteligencia a través de consorcios para combatir eficazmente el fraude en préstamos a PYME.
LexisNexis 리스크 솔루션의 최신 연구에 따르면 중소기업(SMB) 대출 사기의 상당한 증가가 드러났습니다. 응답자의 80% 이상이 지난해 거의 14%의 증가가 있었다고 보고했습니다. 주요 발견 사항은 다음과 같습니다:
1. 합법적인 사업체와 소비자/소유자의 신원 도용이 가장 일반적인 사기 유형입니다.
2. 70%의 조직이 사기 탐지 전략을 조정했습니다.
3. 기업들은 전체 손실이 6%에서 10% 사이일 것으로 예상하며, 그중 17%는 승인 과정에서의 마찰 감소로 인한 것입니다.
4. 기술 기반의 사기 방지를 위한 전환이 진행되고 있으며, 고급 신원 솔루션이 포함됩니다.
이 연구는 신원 증명을 강화하고 다층적인 접근 방식을 채택하며, 조기 사기 탐지에 집중하고, 컨소시엄을 통해 정보를 공유하여 중소기업 대출 사전에 효과적으로 대응할 것을 권장합니다.
La dernière étude de LexisNexis Risk Solutions révèle une augmentation significative de la fraude en matière de prêts aux petites et moyennes entreprises (PME), avec plus de 80 % des répondants signalant une augmentation d'environ 14 % au cours de l'année écoulée. Les principales conclusions incluent :
1. Les identités volées d'entreprises légitimes et de consommateurs/propriétaires sont les types de fraude les plus courants.
2. 70 % des organisations ont ajusté leurs stratégies de détection de la fraude.
3. Les entreprises prévoient des pertes globales comprises entre 6 % et 10 %, dont 17 % à cause de la réduction des frictions dans les processus d'approbation.
4. Il y a un passage à des mesures de prévention de la fraude axées sur la technologie, y compris des solutions avancées d'identité.
L'étude recommande d'améliorer la vérification d'identité, d'adopter une approche multicouche, de se concentrer sur la détection précoce de la fraude et de partager des informations par le biais de consortiums pour lutter efficacement contre la fraude dans les prêts aux PME.
Die neueste Studie von LexisNexis Risk Solutions zeigt einen signifikanten Anstieg von Betrug im Kreditwesen für kleine und mittelständische Unternehmen (KMU), wobei über 80% der Befragten von einem Anstieg von nahezu 14% im vergangenen Jahr berichten. Wesentliche Erkenntnisse umfassen:
1. Gestohlene legale Geschäfts- und Verbraucher/Eigentümeridentitäten sind die häufigsten Betrugsarten.
2. 70% der Organisationen haben ihre Betrugserkennungsstrategien angepasst.
3. Unternehmen erwarten insgesamt Verluste zwischen 6% und 10%, wobei 17% auf reduzierte Hürden in den Genehmigungsprozessen zurückzuführen sind.
4. Es gibt einen Trend hin zu technologiegetriebenen Betrugspräventionsmaßnahmen, einschließlich fortschrittlicher Identitätslösungen.
Die Studie empfiehlt, die Identitätsprüfung zu verbessern, einen mehrschichtigen Ansatz anzunehmen, sich auf die frühzeitige Betrugserwachung zu konzentrieren und Informationen durch Konsortien zu teilen, um effektiv gegen Betrug im Kreditwesen für KMU vorzugehen.
- 70% of organizations have adjusted their strategies for detecting and mitigating fraud
- Companies are enhancing fraud prevention efforts by integrating advanced identity solutions
- Fintech/digital lenders have shown remarkable improvement in fraud prevention
- SMB lending fraud has increased by nearly 14% over the last year
- Most lenders expect fraud levels to continue to increase in the coming months
- Companies anticipate overall losses between 6% and 10% due to fraud
- 17% of fraud losses are due to efforts to reduce friction in approval processes
Insights
The 14% increase in SMB lending fraud over the past year is a significant concern for the financial sector. This trend, coupled with lenders' expectations of further increases, signals a growing challenge in risk management. The shift towards digital channels as the primary source of fraud losses is particularly noteworthy, highlighting the need for enhanced digital security measures.
The emergence of stolen legitimate business identity and stolen consumer/owner identity as top fraud methods indicates a sophistication in fraudulent activities that traditional detection methods may struggle to combat. This evolution necessitates a more advanced, tech-driven approach to fraud prevention, including the integration of behavioral biometrics and real-time transaction scoring.
From an investor's perspective, financial institutions that can effectively implement multi-layered fraud prevention strategies may gain a competitive edge, potentially leading to increased revenues and improved customer loyalty. However, the balance between stringent fraud detection and maintaining a smooth customer experience remains a critical challenge that could impact customer acquisition and retention rates.
The study's findings underscore the critical need for robust cybersecurity measures in SMB lending. The 70% of organizations adjusting their fraud detection strategies reflects a growing awareness of digital vulnerabilities. However, this reactive approach may not be sufficient to combat increasingly sophisticated fraud tactics.
The recommendation to enhance identity proofing through advanced authentication solutions is crucial. Implementing behavioral biometrics and geolocation technologies can significantly bolster fraud prevention efforts, especially in remote channel applications where risks are higher.
The emphasis on early-stage fraud detection, particularly during new account opening, is a key insight. Investors should look favorably upon financial institutions that are investing in advanced screening solutions capable of detecting fake or suspicious identification numbers. Such proactive measures can substantially reduce fraud losses and operational costs in the long run.
The study reveals a significant market opportunity for providers of advanced fraud prevention technologies. With SMB lending fraud increasing and lenders anticipating further rises, demand for sophisticated anti-fraud solutions is likely to grow. This trend could benefit companies specializing in behavioral biometrics, geolocation technologies and real-time transaction scoring.
The anticipated shift from labor-centric to tech-driven fraud prevention strategies suggests a potential market transformation. Investors should watch for fintech companies offering innovative solutions in this space, as they may experience increased demand and growth opportunities.
The recommendation to share intelligence through consortiums and digital identity networks also points to a potential rise in collaborative platforms within the financial sector. Companies facilitating such data sharing and collective intelligence could see increased interest from financial institutions looking to enhance their fraud prevention capabilities.
According to a LexisNexis Risk Solutions Study, Digital Channels See Biggest Increase in SMB Lending Fraud
SMB lending fraud is increasing at consistent rates but is gradually moving away from the influence of the pandemic. Notably, SMB lending fraud is typically caught within the first month of a new customer relationship.
Organizations recognize that reducing SMB lending fraud can lead to increased revenues and improved customer loyalty. With most fraud losses attributed to digital channels,
Key Findings on SMB Lending Fraud
- Top Methods of Fraudsters: In the period surveyed, stolen legitimate business identity and stolen consumer/owner identity have emerged as the most common type of SMB lending fraud, making detection particularly challenging. Recognizing that reducing SMB lending fraud can lead to increased revenues and improved customer loyalty, organizations are enhancing their detection capabilities. However, balancing fraud detection with minimizing customer friction remains a key concern.
- Shift to Tech-Driven Fraud Prevention: There is an anticipated shift from labor-centric to tech-driven fraud prevention as companies face a recurring challenge in managing and mitigating fraud risks. SMB lending fraud is a shared concern across industries, with most companies anticipating overall losses between
6% and10% . About17% of these losses are due to efforts to reduce friction in approval processes. - Increase in Proactive Fraud Prevention: Businesses are enhancing their fraud prevention efforts by integrating advanced identity solutions like behavioral biometrics, geolocation and real-time transaction scoring to bolster their anti-fraud initiatives. Fintech/digital Lenders have shown remarkable improvement in this area.
"Though the perception exists that SMBs have complex structures, our annual study shows that lenders employing a multi-layered solutions approach, integrated with cybersecurity and digital channel operations, experience more positive outcomes when lending to small businesses," said Tom Hunt, director, business risk strategy, LexisNexis Risk Solutions. "These include reduced fraud losses as a percentage of annual revenue and a slower rate of increase in SMB lending fraud."
Top Four Recommendations for Preventing SMB Lending Fraud
- Enhance Identity Proofing: Identity proofing encompasses both verification and authentication processes. While verification is a critical step, it may not be sufficient on its own to detect sophisticated fraud attempts. Authentication solutions offer a more dynamic and advanced approach to fraud detection and prevention, especially in remote channel applications where the risk of fraud is higher. Additionally, businesses need advanced fraud detection systems beyond manual methods. Utilizing technology is essential for effectively identifying and addressing fraud while minimizing inconvenience to customers.
- Adopt a Multi-Layered Approach: Businesses should implement a multi-layered approach to authentication by combining different solutions to address unique risks from different channels, payment methods and products. This approach should integrate cybersecurity with fraud prevention efforts and employ advanced solutions like OTP/two-factor authentication, biometrics and behavioral biometrics.
- Focus on Early-Stage Fraud Detection: New account opening is a crucial stage in the customer journey as well as fraud assessment at the point of origination. Maintaining robust screening solutions while managing the right amount of friction is key. This includes checks for fake or suspicious identification numbers, such as Social Security Numbers (SSN) and Tax Identification Numbers (TIN). A significant portion of fraud cases are identifiable and then prevented by enhancing the screening process.
- Share Intelligence: Businesses should leverage the power of collective intelligence through consortiums and digital identity networks. By participating in a consortium, companies can share valuable data, creating a peer-based intelligence layer that allows them to gain greater context, secure their digital channels against cybercriminal networks and make smarter, real-time risk decisions.
Methodology
The study surveyed 135 individuals working at banks, credit unions, fintech/digital lenders and payment processors with responsibility for risk and fraud assessments or decisions for SMB customers. SMBs are businesses earning up to
Download the latest LexisNexis Risk Solutions Small and Mid-Sized Business (SMB) Lending Fraud Study.
About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data, sophisticated analytics platforms and technology solutions to provide insights that help businesses across multiple industries and governmental entities reduce risk and improve decisions to benefit people around the globe. Headquartered in metro Atlanta,
Media Contact:
Marcy Theobald
678.860.3639
marcy.theobald@lexisnexisrisk.com
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SOURCE LexisNexis Risk Solutions
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