Germany Haunted by Fraudulent Activities in Finance Sector

Frankfurt - A recent study by LexisNexis Risk Solutions has revealed that fraudulent activities in Germany’s finance sector have increased significantly, with 58% of companies reporting a rise in fraud cases over the past year.

The Cost of Fraud

According to the study, businesses in Germany now incur an average cost of €4.18 for every euro lost to fraud, which includes financial losses, internal labor expenses, external costs, interest and fees, as well as the expense of replacing or redistributing stolen merchandise.

Digital Channels Dominant

The study found that digital channels accounted for 52% of overall fraud losses in Germany, surpassing physical fraud for the first time. This has led to a rise in cybercriminals exploiting digital transactions to execute fast and untraceable fraud.

Synthetic Identities Pose Challenge

The study also highlighted the growing threat of synthetic identities, with over half (52%) of German businesses identifying this as their primary challenge in customer identity verification. Fraud remains a widespread problem for businesses, not only impacting financial resources but also operational efficiency, customer trust, and reputation.

Expert Insights

“It is self-evident that new forms of fraud increase the risk of financial losses for consumers and businesses,” said Jason Lane-Scellers, director of fraud and identity at LexisNexis Risk Solutions. “The issues facing businesses become even more challenging due to the fraud multiplier effect, where the losses experienced by organizations continue to increase and far exceed the lost face value in any transaction. Preventing fraud requires a multi-layered approach throughout the customer journey.”

Impact on Customer Perception

The study found that fraud has a significant impact on customer perception and interaction with businesses. Ninety-one percent (91%) of German respondents reported that fraud had influenced customer satisfaction, compared to 75% across Europe, Middle East and Africa.

Recommendations for Businesses

The findings of the study suggest that Germany is particularly sensitive to customer experience, and any impact of fraud or fraud prevention techniques can affect customer satisfaction and lead to broader impacts on companies’ bottom line. The study recommends balancing fraud prevention with appropriate customer experience controls to ensure a positive outcome for both businesses and customers.

Best Practices

In response to the growing threat of fraud, organizations are advised to adopt forward-thinking fraud management and authentication solutions, leveraging technologies such as artificial intelligence, machine learning, and biometric and behavior-based authentication methods.

About the Study

The LexisNexis Risk Solutions True Cost of Fraud Study - Europe, Middle East and Africa surveyed 1,845 global fraud management decision-makers at financial institutions and retail companies, including 52 in Germany. The study was conducted by Forrester Consulting on behalf of LexisNexis Risk Solutions in August 2023.

About LexisNexis Risk Solutions

LexisNexis Risk Solutions harnesses the power of data, sophisticated analytics platforms, and technology solutions to provide insights that help businesses across multiple industries and governmental entities reduce risk and improve decisions. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information-based analytics and decision tools for professional and business customers. For more information, please visit LexisNexis Risk Solutions and RELX.