US Fraud volumes and losses still increasing annually, according to new benchmark study
More than 40% of financial institutions reported year-over-year growth, extending a worrying trend.
NEW YORK, September 14, 2023 – Today, PYMNTS and HAWK:AI, the leading provider of enterprise financial crime prevention software, announced the release of a new report, “Increasing Fraud Heightens Need for Newer, Better Technologies.” The report paints a picture of a sector trapped between increasing financial crime – especially scams – and the perception that any solution will bring added complexity.
Fraud Attacks Still Rising
The benchmark study finds that over 40% of financial institutions (FIs) experienced an increase in fraud compared to the previous year. This disconcerting trend follows last year's findings, where 70% of FIs reported an uptick in fraud compared to 2021.
In addition to FIs seeing rising fraud attacks, 55% of FIs with assets over $5 billion reported a status quo in fraud volumes and losses. According to the study, even when FIs do not see in fraud increasing, very few see the situation improving.
Scams Causing Problems
The report delves into the intricate landscape of fraudulent transactions, revealing that 12% of these incidents stem from scams. The study identified several prevalent scams, with bank tech support and IRS impersonation scams leading the pack. The breadth and impact of these fraudulent schemes underlines the necessity for FIs to employ state-of-the-art, fit-for-purpose technology to safeguard both FIs and their clients.
AI Adoption Growing
The study takes the temperature of FIs on adopting advanced fraud prevention technology, finding that 66% of financial institutions currently leverage Artificial Intelligence (AI) and Machine Learning (ML) to combat the rising tide of fraud. This finding marks a substantial leap from the 34% recorded in 2022. This accelerated adoption signifies the industry's recognition of the need to strengthen their defenses against ever-evolving fraud tactics.
The study highlights a significant paradigm shift occurring among FIs, as 48% of FIs are either actively incorporating or planning to integrate AI or ML-powered systems within the next year. As FIs grapple with static or growing fraud attacks and losses, we see the industry embracing AI tech in greater numbers. We expect to see a continuation of this trend going forward.
“Bad actors are accelerating an arms race,” said Tobias Schweiger, CEO and co-founder of Hawk AI. “A tool that’s capable of combining things like sanction screening and anti-money laundering (AML) transaction monitoring with fraud protection, while enriching the signals of one another and vice-versa, is the answer for how banks can win the arms race—and how they can do it much more efficiently.”
Read the full report here.