LexisNexis Risk Solutions released the conclusions 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 internal labor expenses, external costs, legal costs and recovery fees, and expenses associated with replacing or redistributing lost or stolen merchandise.
While the rapid adoption of digital payments improves payment experiences, it also exposes numerous systems and channels to more innovative fraud attacks. Across Latin America, digital channels are responsible for 51% of global fraud losses, surpassing physical fraud for the first time. Consequently, cybercriminals exploit the anonymity of digital and cross-border transactions to execute rapid and undetectable fraud. Furthermore, the increase in fraud and the use of technologies such as Artificial Intelligence (AI) increase the ability of cybercriminals to exploit both consumers and companies.
The study also reflects the evolution of criminal tactics. In Latin America, the stage of the customer journey with the highest losses due to fraud 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 clear that new forms of fraud increase the risk of financial loss for consumers and businesses,” says Rafael Costa Abreu, director of fraud and identity LATAM at LexisNexis Risk Solutions. “The problems faced by businesses are made even more challenging by the multiplier effect of fraud, where the losses suffered by organizations continue to mount and far exceed the nominal value lost in any given transaction. Preventing fraud requires a multi-layered approach throughout the customer journey.”