More than half (56%) of small and medium businesses experienced banking fraud in the last 12 months, according to a new study from fraud prevention firm Guardian Analytics and the Ponemon Institute.
Among those that experienced fraud, 61 percent were victimized more than once and 75 percent experienced online account take over and /or online fraud. These figures are nearly the same as those in the 2010 Business Banking Trust Study, indicating banks and businesses are struggling to make progress on the issue.
"Banks are facing a lose-lose proposition: losing money and losing customers," said Terry Austin, CEO, Guardian Analytics. "Year-over-year, there has been no improvement overall in the industry’s ability to proactively prevent money from leaving small business accounts that have been compromised.”
“The silver lining is that there is a big opportunity for banks to be proactive and implement fraud prevention strategies that will improve their trusted relationships with customers and save them money in the long run."
In 78 percent of fraud cases, banks failed to catch fraud involving the illegal transfer of funds or other practices such as information identity theft.
Banks were able to keep money from leaving the bank in 22 percent of cases and fully recover fraudulently transferred funds for 10 percent of businesses. Banks were unable to recover funds in 68 percent of cases, leading to losses for both business and banks. Banks took losses in 37 percent of cases by reimbursing businesses for unrecovered funds, and businesses took losses in 60 percent of cases .
Thirty-eight percent of respondents said they access their company’s banking accounts from mobile devices including smart phones and tablet PCs like the iPad, compared to only 23 percent in 2010.
Forty three percent of businesses said they have moved their banking activities elsewhere after a fraud incident. Ten percent of businesses that have experienced fraud have terminated their banking relationship following fraud attacks, and additional 33 percent said they did not fully terminate their relationship, but moved their primary cash management services to another institution.
"This year’s data again affirms that businesses’ trust in their banks is quickly damaged and they are not willing to give their banks a second chance," said Dr. Larry Ponemon, chairman and founder, Ponemon Institute.
"As online and mobile banking adoption continues to grow, the possibility for more fraud and more lost customers escalates. Endpoint security will be challenged to keep up with the growing number of devices and threats, and banks are in the best position to take the lead on proactively protecting all account holders from the wide variety of threats."