Year over year results from the Business Banking Trust Study show that SMBs are ongoing victims of account takeover and still piling up losses due to fraudulent ACH, wire and other transactions, according to Guardian Analytics, which sells behavior-based fraud prevention solutions, together with independent research firm, Ponemon Institute.

The most revealing findings are that, as a result of fraud, SMBs are not only losing confidence in their financial institutions’ fraud prevention practices (30 percent of responses), but are taking some or all of their banking business elsewhere (40 percent).

Nearly three-quarters of online fraud attacks successful

The study revealed that 73 percent of online fraud attacks result in the successful transfer of money. Despite efforts by financial institutions to recover funds, 61 percent of reported fraud attacks result in lost funds.

Reimbursement of losses varies – in some cases the business takes the full loss, in some instances losses are shared, and in one quarter of instances, banks reimburse the business fully for any losses. In the end all parties suffer significant financial loss as a result of fraud.

“The Ponemon Institute’s study clearly outlines the strategic impact that fraud has on a financial institution – lost profits and lost customers,” said Terry Austin, CEO, Guardian Analytics.

“Further, recent court cases have sided with businesses when it comes to fraud liability, emphasizing financial institutions need sound practices and security to protect customers from account takeover attacks.

“Fortunately, there are fraud prevention solutions that are proven to be effective, giving financial institutions a significant opportunity to restore trust with their customers by taking a more proactive stance in preventing fraud.”

Additional findings from the 2012 Business Banking Trust Study include:

SMBs are rapidly increasing their use of online and mobile banking.

• Fifty four percent of businesses now use mobile devices to access online banking, up from 23 percent in 2010
• The proportion of businesses doing all business banking online has more than doubled from 9 percent in 2010 to 20 percent in 2012

Fraud attacks against businesses are widespread

• Seventy four percent of SMBs have experienced electronic banking fraud
• Fifty two percent have been hit by fraud in past 12 months

SMBs expect their financial institution to be the expert, but think they’re not doing enough

• Seventy two percent indicate that they hold the FI primarily accountable for ensuring that their online bank account is secure
• However, only 43 percent say their FI takes appropriate action to limit risky transactions

There is room for improvement for all parties’ fraud prevention efforts

• Money left the financial institution before it was noticed in 73 percent of cases
• Year over year, businesses have not improved their own fraud prevention practices

Fraud losses result in lost business for FIs

• Fifty six percent of SMBs indicate that it would take only one successful fraud attack to lose confidence in their FI’s ability to provide adequate security
• Seventy percent of respondents indicate that online fraud – either successful or just attempted – diminished their trust and confidence in their FI or caused them to take some or all of their banking business elsewhere

“This year’s data confirms that SMBs are looking to their financial institution to be the expert on fraud prevention, and they have every right to do so,” said Dr. Larry Ponemon, chairman and founder, Ponemon Institute. “Fraud techniques continue to evolve rapidly and financial institutions must continually monitor and update defenses to stay ahead of criminal activity. The FFIEC Guidance reinforces this by requiring layered security that, at a minimum, includes anomaly detection, plus risk assessments whenever something in the threat landscape changes, such as the discovery of another new threat.”

The Ponemon Institute’s 2012 Business Banking Trust Study, commissioned by Guardian Analytics with surveys completed in May 2012, provides insights into SMBs’ online banking behavior, their views of banks’ security practices, and the impact just one fraud incident can have on banking relationships. This year’s study was expanded to included sections on ACH payments, mobile banking, and wire transfers. It also provides recommendations for banks and businesses to prevent fraud and improve client trust.

Nearly 1,000 owners and executives of small-and-medium-sized businesses (SMBs) in the United States participated in the study.

Download the report here.

Related Stories:

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• Study says: ATM security worries consumers
• Small businesses lax on cybersecurity but think they’re safe
• Majority of millennials and boomers concerned about online fraud (infographic)
• Study says: Companies still struggle to protect consumer data

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Tags: Business Banking Trust Study, electronic banking fraud, Guardian Analytics, mobile, online banking, Ponemon Institute, SMBs