What Risk Officers Are Saying about 2024

New surveys of risk executives in financial services-released since the beginning of this year-are singing a familiar tune. Risk is increasing, in all channels, and mitigation costs are growing. While all the reports I reviewed are harmonizing on a theme, the underlying surveys are very different, encompassing everything from big-picture challenges like geopolitical risks and climate risks to tactical concerns like fraud losses. At the risk of preaching to the choir, I'll summarize a few that affect the payments ecosystem.

AI and machine learning. In a global survey of members of the Institute of International Finance (IIF), half of respondents cite artificial intelligence (AI) and machine learning (ML) as an emerging risk. At the same time, half (including some of those who identified AI and ML as a risk) say they are using AI and ML to detect fraud. Does this sound a lot like your institution's view of AI?

Cyber risk. Every survey I reviewed reveals the continuing importance of cyber risk. The IIF survey, for example, finds that three-quarters of risk officers include cyber among their top five risks. Among US risk executives, cyber risk is also top of mind. Does this resonate at your bank or credit union?

Fraud. Multiple surveys of risk officers find fraud increasing. Another international survey, this time encompassing North America, finds that more than 80 percent of US financial services companies reported increased spending on fraud management. This survey estimated that every dollar of fraud costs US financial services companies $4.40. Does this echo with your experience?

Scams. As this blog has reported extensively, including just last month, scams are increasing. The North America survey reported that one-third of fraud losses in the United States and Canada were the result of an authorized party being manipulated. Similarly, a survey by Federal Reserve Financial Services found that more than half of surveyed US institutions had experienced fraud of this type. Where does your institution fall on this scale?

Debit cards and checks. The North America survey estimates that debit transactions are 28 percent of transaction volume at US banks-and 32 percent of fraud losses. The Fed survey similarly reported that almost half of US banks had experienced fraud losses on debit cards. Twenty-seven percent experienced losses on checks, almost double the share with check losses in the prior year. Does this jump in check losses resonate with your institution's challenges?

I hope this information is useful as you orchestrate your institution's continuing duet between risk and reward.