Banks, credit unions and digital lenders continue to face an increase in lending fraud targeting small- and mid-sized businesses (SMBs), according to LexiNexis Risk Solutions. 

The 2024 Small Business Lending Fraud study revealed a 13.6% year-on-year increase in SMB lending fraud in 2023, with the most common types involving stolen business identities and stolen customer or owner identities. 

This trend is expected to continue as 64% of respondents anticipate further growth in fraud over the next 12 months. The average anticipated increase was 8%, a slight decline from 10% in 2022 but still higher than the figure of 5% reported in 2021. 

Lenders that primarily used digital channels for loans processing reported a rise in lending fraud, while small banks and credit unions saw a significant decline in the increase of SMB lending fraud, with average increases returning to 2021 levels. 

Even though most fraud was detected within the first month of the customer relationship, only 27% of fraudsters were identified at account origination in 2023, which was down from 32% in 2022. 

Despite the growing fraud rates, the report found that there has been a notable shift toward early detection and proactive prevention strategies. 

Half of all respondents believe that SMB lending fraud can be prevented, compared to only 31% in 2022. 

As more businesses understand technology’s role in combating and preventing fraud, 72% of respondents plan to increase their investment in fraud prevention.