Online banking fraud costs SMEs

Three out of four small- and medium-sized enterprises (SMEs) that encountered banking fraud during the past year were victimised online, according to a new study, reports InformationWeek.

Well over half (56%) of those companies experienced some form of banking-related scam during the previous 12 months, according to the report.

About 75% of those cases involved online account takeover or other Web-based fraud. Some 61% of SMEs that fell prey to bank fraud were victimised more than once.

“Our research reveals continued bad news,” according to the report, says eWeek. The financial industry “has not moved the needle” in addressing the security issues that would address account takeovers and other types of fraud “plaguing” SMEs and their banks, the report found.

The worrying thing about the increase in online fraud is that organisations are ill equipped to detect these scams.

The banks didn't discover more than three-quarters of these security issues until after the funds had been transferred out of the victim's account.

The report also said 78% of the time, banks failed to catch fraud involving fund transfers or information identity theft, and that stolen funds were recovered for only 10% of the businesses, according to Credit Union Times.

In the rest of the cases, banks took the losses 37% of the time and reimbursed the businesses, the report said, adding that 70% felt their banks should be ultimately responsible for securing online accounts.

Meanwhile, 43% said they moved business elsewhere after being victimised by fraud, including 10% who completely terminated their relationships. The rest moved primary cash management services, the report said.