The cost of trying to eradicate fraud for financial institutions has increased dramatically in the last two years, according to the annual LexisNexis True Cost of Fraud Study released Wednesday.

The cost of fighting the illegal activity costs more than the fraud itself.

The cost of fighting fraud went up 22.4% since 2020, the research embodied in the “True Cost of Fraud Study: Financial Services and Lending,” which was conducted by LexisNexis Risk Solutions, said. The study included financial advisors, trust and wealth management executives, mortgage company executives and other financial professionals with 426coming from the United States and 76 from Canada.

The culprits that are making fraud easier to perpetrate include the addition of new payment mechanisms, online and mobile channel transactions, and the international expansion of many firms, LexisNexis said. The costs of fighting fraud actually are more than the amounts lost to the fraud itself, the firm said.

For every dollar lost to fighting fraud for U.S. financial companies $4.23 is paid out to fight the illegal activity compared to $3.64 paid out in 2020. The cost for Canadian financial services firms rose from $3.16 in 2020 to $3.78 in 2022. The calculation for the cost of fighting fraud includes the costs for labor and investigation, legal fees, external recovery expenses, and the fees incurred during the insurance application, underwriting and processing procedures.

Fraudsters are increasingly targeting financial transactions conducted on mobile devices; the increased use of bots, which are autonomous internet programs that can interact with users; and the increased use of buy-now-pay-later platforms, the study said. Fraudsters also are targeting new accounts opened at all types of financial institutions.

Consumers often resist the inconvenience of adding security, which makes the lack of identity verification a top challenge that contributes to fraud, LexisNexis said.

"It is clear that fraud has become more complex with various risks occurring simultaneously," Chris Schnieper, senior director of fraud and identity strategy at LexisNexis Risk Solutions, said in a statement. "To minimize fraud, organizations can no longer rely on manual processes to reduce fraud. Firms using a multi-layered solutions approach that integrates identity verification and authentication within digital consumer experience can lower their cost (of fighting fraud) and the volume of successful fraud.”