Identity Fraud Cost Nearly Half A Million US Dollars To Every Third Bank, Regula's Global Survey Says

A global survey conducted by Regula together with Sapio Research company from December 2022–January 2023 has revealed that the impact of identity fraud varies for organizations in the Financial Services industry, based on whether they belong to the Banking or FinTech sector.

Specifically, every fourth bank reported experiencing over 100 identity fraud incidents in the past year (26% of organizations), which is lower (17%) for the FinTech sector. 

Economic damage

When asked to evaluate the cost of the identity fraud they had experienced, the banking sector was found to be the most severely impacted, with a median financial burden of over $310,000. In fact, for 31% of banking organizations, the cost of such incidents was nearly half a million dollars, at $479,000 and more. 

On the other hand, the same indicator of the median cost of fraud for FinTech organizations was considerably lower, at around $120,000. This amount was even lower than the median across all surveyed sectors, which included Aviation, Technology, Telecom, and Financial Services, with the organizations reporting a median of expenses of up to $240,000.

Addressing the gap 

Fintech companies may have smaller customer bases and be subject to less regulation

The gap may reflect the larger scale and complexity of banks’ operations, their legacy systems, as well as the regulatory and reputational risks they face.

On the other hand, Fintech companies may have smaller customer bases and be subject to less regulation. The following survey results provide support for this idea.

Collateral effect

The key costs affecting organizations across all sectors due to identity fraud are related to business disruption (44%) and legal expenses (36%). However, the situation is somewhat different for financial organizations.

Specifically, for the Banking sector, the second-largest cost resulting from identity fraud is penalties and fines (36%), while for FinTech organizations, it is the loss of current and potential clients (40%).

Common type of identity fraud 

In 2022, the most prevalent form of fraudulent activity was using fake or modified physical documents

In 2022, the most prevalent form of fraudulent activity experienced by organizations in all surveyed sectors was using fake or modified physical documents. 

Nearly half of FinTech companies (46%) reported being affected, while for banks, such cases were even more frequent: 54% of them reported dealing with document forgery in the past year.

Cause of concern

“The rapid digitization of the Financial Services sector has led to an increase in identity fraud, as fraudsters take advantage of the lack of physical presence required for identification. Although physical ID verification is the most reliable, organizations increasingly turn away from it due to scalability, cost, and user experience issues."

"To effectively combat identity fraud in the digital age, organizations must implement secure and reliable identity verification processes, leveraging advanced ID verification technologies and expertise in document security features,” says Ihar Kliashchou, Chief Technology Officer at Regula.

Fraud detection and prevention

Companies require a comprehensive IDV solution that allows for both document and biometric checks

It's no surprise that in this context, 93% of organizations recognize the significance of online identity verification in detecting and preventing fraud. Notably, in the USA, 99% of companies share this view.

To ensure truly fraud-resilient identity verification, companies require a comprehensive IDV solution that allows for both document and biometric checks. The many offerings available on the market may lead one to believe that it’s necessary to combine several various standalone IDV products, but in fact, businesses can get everything from one vendor, such as Regula.

IDV solutions

Not only do Regula’s IDV solutions perform flawless checks of nearly all types of identity documents, but they also match a person’s selfie with their document and carry out liveness checks to ensure users are dealing with a real person, not a presentation attack.

Regula’s IDV solutions are successfully used at 80 borders all over the world, where they help prevent identity fraud and contribute to public security.