The Real Cost of Fraud
It is clear that fraud has consequences that run deeper than just financial implications. Fraud also has the potential to erode customer trust and negatively influence marketplace perception of a company’s overall brand. Just ask Target, which is still dealing with the aftermath of a massive credit card breach more than three years after it happened.
The cost of fraud runs the gamut from measurable effects – money and productivity losses – to less tangible results that impact an organization more broadly. One way or another, fraud costs the company time, money, productivity…and potentially customer relationships and brand loyalty.
According to the Association of Certified Fraud Examiners, the money lost by businesses to fraudsters amounts to over $3.5 trillion each year. And as the Global Fraud Attack Index™, a PYMNTS/Forter collaboration, illustrates, the impact of fraud is increasing; it’s getting more expensive and is happening more often.
As fraudsters have become more sophisticated, companies have had to put sophisticated fraud prevention tactics in place. In an interview for pymnts.com, Ron Andrews, VP and vertical leader for financial services at Convergys, says that, “Making somebody prove they are who they say they are creates an awkwardness at the beginning of a customer service transaction.” He goes on to say, “It means I don’t trust you until you prove to me this information and answer these questions. If you don’t, I’m not going to service you.”
The answer, of course, is better security. However, for many consumers the inconvenience arising from obtrusive fraud screening could negatively affect their brand loyalties. That’s why smart companies are addressing the challenges around fraud to differentiate themselves from competitors by establishing trust by allowing customers a “quick path in.”
Andrews says, “Clearly, the best authentication is invisible to the customer. It happens behind the scenes. That’s why the industry is so excited about voice and mobile device solutions.”
The real cost of fraud, both in terms of lost dollars and the erosion of customer loyalty, is difficult to fully appreciate. Yet it is clear that the cost is high, and therefore the prevention of fraud is critically important for business success. At the same time, there is an opportunity for companies to take advantage of new ways for trusted customers to interact safely and easily that will differentiate them in the marketplace and position them for future success.