MADISON, Wis.—The amount of money financial institutions are spending on payments channel fraud prevention is exceeding actual fraud losses, a Federal Reserve study indicates.
Robert Jarosinski, risk management senior consultant at CUNA Mutual Group, said the Fed study crossed the spectrum of financial institutions, but the majority of respondents were credit unions.
“The majority of the respondents said they spent more on prevention of fraud versus actual fraud losses,” Jarosinski explained during a CUNA Mutual Group webinar on “Managing Risks For Emerging Payments.”
The percentage of respondents saying they spent more on fraud prevention than actual losses ranged across payment channels, including wire, ACH, cash, PIN debit, signature debit, checks, mobile, prepaid and credit cards. Jarosinski said responses ranged from equal spend for both fraud prevention and losses, to sometimes three times the number of respondents saying they spent more on prevention (see chart below).
“The only payment channel where respondents said they spent less on prevention was signature debit,” Jarosinski said. “Sixty-two percent of respondents said they paid more on fraud losses for signature debit than prevention costs.”
For the mobile channel, 45% of respondents said they spent more on prevention, while only 11% said they spent more on fraud losses—45% said they don’t offer mobile.