In recent years, the demand for digital channels among consumers has grown rapidly. The ability to make payments on a mobile app or apply for a loan online, without ever needing to visit a physical branch, has become ubiquitous among larger financial institutions. To remain competitive, many credit unions are adopting these new digital channels. However, it is not without its risks. Without the proper fraud and identity protocols in place, credit unions could be on the hook for unwittingly authorizing a fraudulent transaction or loan.

As EMV identity verification has replaced magnetic-stripe cards over the past decade, criminals have sought out new methods to perpetrate fraud. Digital channels have become the new weak point for identity and account takeover fraud: It is harder to verify if a person is who they say they are when they're behind a computer screen. According to LexisNexis Risk Solutions' "2017 True Cost of Fraud Study," 31% of monthly transactions that pass through financial service companies are fraudulent. This is higher among mid- to large-sized financial institutions where digital channels account for more than half of all transactions.

The cost of fraud can be debilitating for a credit union. According to the study, for small financial institutions with less than $10 million in revenues, every dollar of fraud costs an average of $3.08 in chargebacks, fees, interest and so forth. This is notably higher than for larger financial institutions, which have the benefit of scale, but are also more likely to already have multi-layered identity verification in place to deter fraudsters. These fraudsters are instead turning their attention to smaller, community-based institutions, such as credit unions, which might have weaker protocols.