Independent Study Reveals Banks Have a New Troubled Asset: Their Customers

Guardian Analytics and Ponemon Institute Study highlights 40 percent of small and medium businesses change banks after a fraud incident

Mar 09, 2010, 08:30 ET from Guardian Analytics

LOS ALTOS, Calif., March 9 /PRNewswire/ -- Guardian Analytics, the innovator in predictive analytics-based fraud prevention software, together with independent research firm, Ponemon Institute, today announced the results of the 2010 Business Banking Trust Study. Over 500 executives and business owners from small and medium businesses (SMB's) in the United States participated in the study. The research offers the first comprehensive look into the pervasiveness of fraud, the state of security at banks and SMB's, and the impact of fraud on businesses' relationships with their banks. The results indicate that 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.

"Banks have a new troubled asset – their customers," said Terry Austin, CEO, Guardian Analytics. "The survey data proves that financial institutions are failing to protect the small and medium businesses that are at the heart of our economic recovery. SMBs are fed up with the banks that are leaving them vulnerable to fraud and not reimbursing them when they are attacked. Banks that do not improve their fraud prevention practices will lose customers and hurt their own recovery."

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:

  • Fraud Attack Rate: 55 percent of businesses reported experiencing fraud in the last 12 months, with 58 percent of fraud enabled by online banking activities.
  • Fraud Detection Rate: 80 percent of banks failed to catch fraud before funds were transferred out of their institution.
  • Fraud Loss Recovery: In 87 percent of fraud attacks, the bank was unable to fully recover assets.
  • Fraud Loss Reimbursement: 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.
  • Customer Churn: 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.
  • Transparency: 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."

The Guardian Analytics 2010 Business Banking Trust Study includes more details on SMB's online banking behavior, their views of banks' security practices, and top five recommendations for banks to retain customers through better security and communication practices. The full report is available for download at

Ponemon Institute was commissioned by Guardian Analytics to conduct the survey independently in February 2010. Guardian Analytics protects financial institutions and their customers from online fraud attacks and recently released FraudMAP® for Business Banking, the industry's first solution designed to prevent fraud in online business banking accounts from login to logout.

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About Guardian Analytics

Headquartered in Los Altos, Calif., Guardian Analytics is focused on the prevention of online account fraud. The company's real-time risk management approach to fraud detection, forensics and risk monitoring is built on strong analytics and predictive models of individual behavior. Leading financial services institutions rely on Guardian Analytics to protect individual account assets and the integrity of their online channels. Founded in 2005, Guardian Analytics is privately held with venture funding from Foundation Capital. For more information, please visit

About Ponemon Institute

The Ponemon Institute© is dedicated to advancing responsible information and privacy management practices in business and government. To achieve this objective, the Institute conducts independent research, educates leaders from the private and public sectors and verifies the privacy and data protection practices of organizations in a variety of industries.

SOURCE Guardian Analytics