LexisNexis® Risk Solutions, a part of RELX Group, released its 2017 True Cost of Fraud for Financial Services. The study shows that for every dollar of fraud, financial services companies incur $2.67 in costs, which includes chargebacks, fees, interest, and labor, according to the LexisNexis Fraud Multiplier.

Based on a comprehensive survey of 185 risk and fraud executives in financial services companies, including retail and commercial banks, credit unions, investments, trusts and wealth management, the study evaluates how to navigate the growing risks of fraud, while strengthening customer trust and loyalty.

A key finding from the study shows that digital channels increase the cost of fraud for financial services companies, if they are not managed effectively. Mid-to-large digital financial services companies, which earn a minimum of $10 million in annual revenues, 50 percent of which is through online and/or mobile channels, pay $3.04 for every dollar of fraud. This is compared to mid-to-large non-digital financial services companies with less than 50 percent of revenue from online or mobile channels, which pay $2.35 for every dollar of fraud. Fraud costs as a percentage of revenues is also higher among mid-to-large digital financial services companies.

"As digital channels become more prevalent, particularly with consumer demand for mobile banking, fraud is a significant drain on financial services companies' revenues -- more than just the value of the fraud itself," says Paul Bjerke, vice president, fraud and identity management strategy, LexisNexis Risk Solutions. "These companies need to track and combat fraud effectively to reduce the cost on their business and protect their customers in the new digital age."

Other key findings from the study include:

• Identity fraud, including synthetic identity fraud, is a significant issue for financial services firms, particularly in larger banks with more than $50 million in revenue. Sixty-two percent of fraud losses for these banks are due to identity fraud. Furthermore, three-fourths of mid-large digital firms indicate identity verification as a top online challenge; they are also more likely than other financial services companies to cite device verification and excessive manual reviews as a challenge.

• Financial services firms that track fraud costs by both channel and payment method experience lower fraud costs: $2.49 per dollar of fraud, versus $3.04 per dollar of fraud. Large digital firms are most likely to track fraud costs by both channel and payment method, while mid-sized firms with revenues of $10 million to $50 million still lag behind.

• Financial services firms that layer fraud prevention solutions to counteract both identity and transaction fraud experience fewer false-positives, manual reviews and a lower overall cost of fraud.

"As the risk of identity and transaction fraud grows, particularly among digital channels, financial services companies must implement a multi-layered approach to fraud prevention. This approach helps accelerate the good transactions, and reduces the costs associated with manual reviews, successful fraud attempts and generates fewer false-positives," says Kimberly Sutherland, senior director, fraud and identity management strategy, LexisNexis Risk Solutions.