Banks still spending on fraud prevention

A new report on US banks' fraud management strategies concludes that funding for addressing fraud is unlikely to be scaled back despite the economic downturn,

"The good news is that funding for addressing fraud management is seen as mission-critical by financial institutions," says Nick Holland, senior analyst with Aite Group and author of the report. Holland says bank fraud management departments are centralising, investing in monitoring technology and continuing to place a strong emphasis on the "human element" as the most critical component of fraud mitigation.

The report, which is based on interviews with fraud managers at 23 of the top 150 US financial institutions, also sheds some interesting light on the drivers for banks' fraud management strategies, both now and in three years time. Supporting law enforcement efforts and recouping fraud losses are not necessarily high on banks' agenda. Instead more than 80% said preventing fraud losses and meeting compliance requirements was important now, increasing to 90% or more in three years.

While banks spend a lot of time, money and effort in trying to meet regulatory requirements, preventing fraud should be a priority of the bank regardless of compliance, as not only does it cost the banks millions ever year, but it also tarnishes their relationship with customers and impacts brand loyalty. Will there come a day when people shop for banks based not only on interest rates but also their track record in preventing fraud?