Fraud is one of the most significant–and costly–risk factors facing financial institutions and payments providers today. Fraudulent transactions using payment cards alone are projected to top $36 billion in global volume in 2024, according to the Nilson Report. 

As staggering as that figure is, it’s likely actually under-stating the actual cost incurred to providers. A 2024 study from Lexis Nexis found that every dollar of fraud loss results in $3.41 in additional costs related to labor, investigations, legal and other fees and external recovery expenses for U.S. financial services firms. Add in fraud-driven reputational damage that can drive away existing customers and make it harder to win new ones, and it’s clear fraud has the potential to become a very expensive problem. 

The Executive’s Guide to Comprehensive Payments Fraud Detection

Given the potential losses involved, providers must invest in defensive fraud detection tools and systems designed to detect and prevent financial and payments fraud. But mitigation itself doesn’t come cheap, so it’s important for your business’s bottom line to ensure anti-fraud spending is done wisely. 

To help optimize your firm’s investment in this critical area, here are three key considerations to ensure you’re getting the most bang for your fraud mitigation buck. 

1. Establish fraud detection benchmarks 

Payment fraud risk varies depending on several variables, including the volume of transactions you’re processing, what channels you’re operating in and what type of industry you’re in. Therefore, establishing meaningful fraud benchmarks for your business requires careful consideration of your company’s risk appetite, the financial products you offer, and more. 

How to Fight Payments Fraud while Preserving a Positive UX

The most effective and efficient method of solving that equation is to ensure you have full visibility into how much–and where–fraud attempts are occurring, and how much of it is preventable. From there, you can establish meaningful benchmarks for your organization to work toward, using fraud mitigation KPIs–such as dispute rate or fraud rate/loss per client–to measure how effective your efforts are at reducing specific types of fraud and what, if any, changes should be made.  

How Clients Can Mitigate Risk from Fraud with Automated Incoming ACH Screening

2. Leverage ‘smart’ fraud detection technologies 

Advances in artificial intelligence (AI) and machine learning technology have driven the creation of powerful new weapons payments and financial services providers can bring to bear in the fight against financial and services and payments fraud. However, these same high-tech fraud detection tools also can be exploited by fraudsters to better achieve their nefarious ends.

In this high-tech, high-stakes arms race, keeping up requires technology that can continually get smarter over time. Such dynamic systems ingest millions of data points to analyze patterns and identify anomalies that could indicate fraud, and subsequently use that information to step up defenses against similar future attempts–providing a highly future-proof solution that continually evolves to stay ahead of the bad guys. 

3. Find the right fraud detection partner

No matter how sophisticated an organization’s fraud detection tools, the overall effectiveness of its defenses depends heavily on finding the right fraud specialist partner to offer crucial guidance in developing a sound fraud mitigation strategy, implementing comprehensive mitigation tactics,  and providing ongoing support. 

When evaluating a potential fraud mitigation partner, here are some of the key capabilities to look for: 

• Customized solutions that can support your company’s unique transaction and risk profile

• Multi-layered solutions that offer comprehensive fraud and risk protection across channels and payment types

• Enhanced risk decisioning based on actionable, real-time data for card-based transactions

• A holistic, end-to-end offering that addresses both operational and transactional risk

• Top-notch customer support and dispute services that leverage both digital tools and human-based support 

Want to learn more about fraud detection tools? 

Contact us to find out how to get the most out of your fraud mitigation investment.