When starting a business, few people expect to have to be a full-time security expert in addition to being a full-time entrepreneur. Unfortunately, micro and small businesses make particularly attractive targets for fraudsters. In 2015, more than 250,000 of these businesses were the victims of unauthorized transactions against their business account, with the losses totaling $3.1 billion. These costs pose both a massive direct risk to FIs and a tremendous indirect cost as the strain of fraud resolution eats away at customer loyalty.

For many businesses, discovering fraud is just the first step in a painful resolution process. Lacking many of the liability protections afforded to consumers, business fraud victims are often forced to turn to the courts to recover their losses. As conflicts drag on, fraud victims fight against their financial institution to recover lost funds – eroding any sense of loyalty and creating an adversarial relationship that benefits only fraudsters. Many victims decide it is better to simply move their business elsewhere.

The risk of switching is especially profound for small businesses ($1 million to $10 million in annual revenue). Three in ten small business fraud victims switched payment services to a different financial institution as a result of the fraud – a massive exodus of previously loyal customers.  Since small businesses often have financial relationships with multiple institutions, each financial institution serving the business already has pre-established competition. The ease of switching between these competing institutions makes establishing strong customer loyalty especially important in maintain primary FI status.


Building loyal customers in financial services requires establishing strong trust that accountholders and their FI are on the same side. Engagement with micro and small business accountholders on emerging fraud threats and available anti-fraud tools can help open a security dialogue and create an environment where business fraud victims are partners with their FI rather than adversaries. 


About Kyle Marchini

Kyle is a senior analyst in Javelin's Fraud & Security practice.  His research focuses on strategies for financial institutions to protect their clients from fraud within the context of emerging threats to consumers’ financial security. He regularly co-authors reports analyzing methods for preventing, detecting, and resolving instances of financial crime, the impact of different fraud mitigation strategies on consumer behavior, as well as the projected consequences of technological changes in payment platforms on data security.

Before joining Javelin, Kyle was a Research Fellow at Ludwig von Mises Institute where he evaluated the financial and operational benefits from the implementation of the quality management standard ISO 9001 in manufacturing firms.

Kyle holds Bachelor’s degrees in Economics and Music from Grove City College.

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