Identity fraud cost nearly half a million US dollars to one in three banks last year, says Regula Global Survey

Regula, a global developer of forensic devices and identity verification (IDV) solutions, has released the findings of the second phase of their research, which explores the business impact of investing in IDV. The results indicate a significant gap in the cost of identity fraud between banking and fintech organizations around the world.

RESTON, Va., March 29, 2023–(BUSINESS WIRE)–A global survey* conducted by Regula together with the Sapio Research company from December 2022-January 2023 has revealed that the impact of identity fraud varies for organizations in the financial industry, based on whether they belong to the Banking or FinTech sector . Specifically, one in four banks reported experiencing over 100 identity fraud incidents in the past year (26% of organizations), while this number is lower (17%) for the FinTech sector.

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Costs of Identity Fraud for Financial Organizations. A global survey conducted by Regula from December 2022-January 2023 has revealed that the impact of identity fraud varies for organizations in the financial services industry. The results indicate a significant gap in the cost of identity fraud between banking and fintech organizations around the world. (Graphic: Business Wire)

Financial damage. When asked to estimate the cost of identity fraud they had experienced, the banking sector was found to be the hardest hit, 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 up. On the other hand, the same indicator of the median cost of fraud for FinTech organizations was significantly lower, around $120,000. This amount was even lower than the median across all surveyed sectors, which included aerospace, technology, telecom and financial services, with the organizations which reported a median of expenditures of up to $240,000.

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The gap may be a reflection of the greater scale and complexity of the 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 lend support to this idea.

Safety effect. The main costs affecting organizations across all sectors due to identity fraud are related to business interruption (44%) and legal expenses (36%). However, the situation is somewhat different for financial organisations. 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 customers (40%).

The most common type of identity fraud. Last year, the most prevalent form of fraud experienced by organizations across all sectors surveyed was the use of fake or modified physical documents. Almost 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.

“The rapid digitization of the financial 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 are increasingly turning away from it due to issues with scalability, cost and user experience. To effectively combat identity fraud in the digital age, organizations must implement secure and reliable identity verification processes, leverage advanced ID verification technologies and expertise in document security capabilities.” says Ihar Kliashchou, Chief Technology Officer at Regula.

It is no surprise that in this context, 93% of organizations recognize the importance of online identity verification in detecting and preventing fraud. In the US in particular, 99% of companies share this view.

To ensure truly fraud-resistant identity verification, companies require a comprehensive IDV solution that allows for both document and biometric checks. The many offers available on the market may lead one to believe that it is necessary to combine a number of different stand-alone IDV products, but in fact companies can get everything from one supplier, eg Regula. Not only do Regula’s IDV solutions perform flawless checks on almost any type of identity document, but they also match a person’s selfie with their document and perform liveness checks to ensure you’re dealing with a real person, not an impersonation attack. Regula’s IDV solutions are successfully used at 80 borders worldwide, where they help prevent identity fraud and contribute to public safety.

*The survey was initiated by Regula and conducted by Sapio Research in December 2022 and January 2023 using an online survey of 1,069 fraud detection/prevention decision makers across the financial services (including banking and fintech), technology, telecom and aviation sectors. Respondent geographies included Australia, France, Germany, Mexico, Turkey, UAE, UK and USA.

About Regula

With our 30+ years of experience in forensic research and the largest library of document templates in the world, we create ground-breaking technologies in document and biometric verification. Our hardware and software solutions enable over 1,000 organizations and 80 border control authorities globally to provide first-class customer service without compromising safety, security or speed.

Regula was named a Representative Vendor in the 2022 Gartner® Market Guide for Identity Proofing and Affirmation. Learn more at mobile.regulaforensics.com.

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Contacts

Kristina
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