As much as we'd like to see fraud vanish and honesty take its place, don't expect the day to come any time soon. According to a new report from the Aite Group titled, "Fraud Management at Retail Banks and Credit Unions: The Vendor Landscape," fraud keeps growing as a serious concern for financial institutions and is becoming increasingly multichannel. With large financial institutions investing more and more in the necessary services of fraud management vendors, smaller financial institutions with fewer resources are especially at risk of being attacked, according to the Boston-based research and advisory firm. "Since fraud is indiscriminate of financial institution size, small institutions are no safer than larger institutions and, in fact, may be greater targets given the commoditization of attacks such as phishing," Aite Group senior analyst Nick Holland said. But the grim news has a silver lining for fraud-fighting vendors: Holes in fraud management vendors' market share provides an opportunity for business in some areas, such as with small and mid-sized financial institutions and in enterprise fraud management. The report, based on a survey conducted by Aite Group, looks at fraud management activity in four areas: New account opening fraud cases, such as ID verification and authentication; fraud databases; enterprise fraud case management; and check fraud. Aite Group discovered that while market penetration is high for some vendors, with as many as 70% of surveyed institutions using the same vendor, most vendors have very low market shares-usually about 30%. In the new account opening fraud arena, Fidelity Information Services has the highest market penetration, with 15 of the 23 institutions surveyed claiming to use FIS, Holland said. Experian and LexisNexis trail closely behind, with more than half of the remaining institutions using Experian and just under half using LexisNexis. However, a high market penetration does not equal a high market share for these vendors-judging by total deployments, FIS is only used by 14% of surveyed institutions, followed closely by Experian at 11%. "This indicates that vendors are not generating as many revenues per institution as they could be, suggesting that there is room for further growth even in an apparently well-penetrated market," Holland said. This high market penetration/low market share trend continues in the fraud database category, with 17 out of 23 institutions using FIS ChekSystems or Early Warning Deposit Check for this service and both vendors ranking low in terms of deployments. The check fraud category is no different-Early Warning leads in market penetration with 15 out of 23 institutions using the vendor, yet market share is split between Early Warning and Fiserv Carreker, with neither vendor dominating. Aite Group's findings on institutions' size and deployment patterns reveal that they use the services of several vendors simultaneously, though not according to institution size. In the new-account opening fraud management category, the institution ranking 20th by number of checking accounts uses 11 different vendors, while the second largest institution uses only three. However, the fact that institutions use more than one vendor presents an opportunity for vendors to snag their piece of the pie, the think firm said in its report. "Since most financial institutions work with multiple vendors, this indicates that vendors could be generating greater revenues from individual institutions that are using a multitude of separate vendor offerings," Holland said. The fourth fraud management area, enterprise fraud case management, presents the biggest opportunity for vendors as it is currently deployed the least by institutions. The vendor leading the pack, Fiserv's Carreker, is used by just three of the surveyed institutions. This leaves plenty of room for other vendors to step in. "Vendors' cooperation in bringing enterprise level fraud management capabilities to market are likely to be well-received," Holland said. Aside from entering the underpenetrated markets of small and mid-sized financial institution fraud management and enterprise fraud management, how can fraud management vendors use the findings of this survey to their advantage? Since institutions are likely to strive toward using fewer vendors, Aite Group recommends that vendors form partnerships with one another to make that transition easier for the institutions, allowing them to utilize many fraud management services from the same vendor. The financial institutions themselves can also do their part to ensure fraud management becomes more effective. The numbers of vendors currently used by institutions indicate a lack of focus in the fraud management spectrum, and Aite Group suggests they isolate and target their most concerning fraud problem areas. In addition, they can encourage vendors to work together and therefore "decrease the number of siloed solutions and provide greater transparency for enterprise level fraud monitoring." To combat the ever-persisting fraud problem, consolidation for both institutions and vendors may lead to a more pinpointed, powerful result in the fight against fraud. "Much opportunity remains for financial institutions and vendors to consolidate their solutions," Holland said. "It would appear that cooperation between vendors providing holistic solutions to the market would have mutual benefits." –[email protected]