LexisNexis Risk Solutions has released the findings of its study ‘The Real Cost of Fraud 2023 – Latin America’. The annual report, based on research conducted by Forrester Consulting, reveals that companies in Latin America now face a fraud cost 3.9 times the nominal value lost in fraudulent transactions.
In Brazil, 59% of companies reported an increase in fraud in the 12 months prior to the survey. Organizations face an average cost of R$ 3.59 for every real lost to fraud (R$ 3.01 for retailers and R$ 4.49 for financial institutions). These costs include financial losses due to fraud, as well as expenses related to internal labor, external costs, legal fees, recovery fees, and expenses associated with the replacement or redistribution of lost or stolen goods.
While the rapid adoption of digital payments improves payment experiences, it also exposes numerous systems and channels to more innovative fraud attacks. In Latin America, digital channels account for 51% of total fraud losses, surpassing physical fraud for the first time. Consequently, cybercriminals exploit the anonymity of digital and cross-border transactions to execute quick and undetectable frauds. Furthermore, the rise in fraud and the use of technologies such as Artificial Intelligence (AI) enhance the ability of cybercriminals to exploit both consumers and businesses.
The study also reflects the evolution of criminal tactics. In Latin America, the customer journey stage with the highest fraud losses is the creation of new accounts, representing the biggest challenge for financial institutions (46%) and retailers (44%). Criminals are exploiting the growing popularity of digital banking and e-commerce by using stolen or synthetic identities to open fraudulent accounts.
“It is evident that new forms of fraud increase the risk of financial loss for consumers and businesses,” says Rafael Costa Abreu, fraud and identity director LATAM at LexisNexis Risk Solutions. “The challenges faced by companies are further compounded by the multiplier effect of fraud, where the losses suffered by organizations continue to accumulate and far exceed the nominal value lost in any transaction. Preventing fraud requires a multi-layered approach throughout the entire customer journey.”