According to a study by Ponemon Institute, criminals are successfully attacking SMB bank accounts at an unprecedented rate, banks are failing to proactively catch fraud, and a high percentage of SMBs are firing their banks because they are experiencing fraud.
The 2010 Business Banking Trust Survey sheds light on where security, communication and trust are breaking down between SMB's and their banks, and the destructive impact that fraud has on the SMB-financial institution relationship. It also highlights that customers and banks are out of alignment regarding responsibility for protecting online accounts.
Data highlights include:
- 55 percent of businesses reported experiencing fraud in the last 12 months, with 58 percent of fraud enabled by online banking activities.
- 80 percent of banks failed to catch fraud before funds were transferred out of their institution. In 87 percent of fraud attacks, the bank was unable to fully recover assets.
- 57 percent of the respondents that have experienced a fraud attack were not fully compensated by their banks. 26 percent were not compensated for any part of their losses.
- 40 percent of businesses said have moved their banking activities elsewhere after a fraud incident.
- 11 percent of businesses that have experienced fraud claimed they have terminated their banking relationship following fraud attacks, and additional 29 percent said they did not fully terminate their relationship, but moved their primary cash management services to another institution.
- 24 percent of businesses claim that their banks do not provide a policy explaining the bank's responsibilities to secure and protect their companies' accounts from fraud.
- 39 percent are unsure if such a policy exists.
"Ultimately the data points to the need for banks to evolve their definition of reasonable security and proactively invest in process and technology to better protect their online banking customers," said Dr. Larry Ponemon, chairman and founder, Ponemon Institute. "Only 20 percent of banks were able to identify fraud before money was transferred. The ROI of investing in fraud prevention is clear when you consider how fraud and churn drive productivity and profit loss as well as legal and reputation risks."