Experts urge complete re-evaluation of current measures to secure, detect and resolve identity fraud.
The 2020 Identity Fraud Report, released by Javelin Strategy & Research, reveals financial institutions’ methods to identify and respond to fraud are no match for criminals’ high-tech schemes to hijack consumer accounts.
Fraud losses grew 15 percent in 2019 to $16.9 billion even as instances of fraud fell from 14.4 million in 2018 to 13 million in 2019, which resulted in consumers facing $3.5 million in out-of-pocket costs last year as criminals shifted their focus from card fraud to opening and taking over accounts.
“These findings should be a wake-up call for financial institutions, the payments industry, businesses and consumers across America.
The data is proof of what we’ve long known — the full weight of identity fraud lies not only in counterfeit credit cards and magnetic stripes but in full account takeover and new account fraud.
Now it’s time to elevate our understanding of what security, detection and resolution really mean,” said Krista Tedder, Head of Fraud with Javelin Strategy & Research.
The study found account takeovers — identity theft where a criminal gains unauthorized access to an online account belonging to somebody else — are trending at the highest loss rate, up a staggering 72 percent over prior year.
This is due in large part to technological advancements that have made it easier for criminals to manipulate and socially engineer information, while making it harder to detect account takeovers without additional security infrastructure.
And criminals work quickly — 40 percent of all fraudulent activity associated with an account takeover occurs within a day.
“We’ve learned that scammers are very shrewd and adept at capitalizing on current events and new platforms, including peer-to-peer payment apps.
Using these payment apps for anything other than sending money to someone you know presents significant fraud risk for both consumers and financial institutions,“ said Kathy Stokes, AARP Director of Fraud Prevention Programs.
“Every day, millions of Americans exchange their personal information for convenience.
When you download an app, open an online account, or enter your email address, your digital footprint grows.
The more data you share, the more likely it is that a criminal can access your personal information and use it for fraudulent purposes.
That’s why it’s so important to know who has your data and whether it’s been exposed,” said Jason Park, Chief Growth Officer, Allstate Identity Protection.
The study also found that peer-to-peer payments (P2P) fraud is skyrocketing.
Financial institutions have found that P2P systems, which allow one person to send payments to another person, have seen a 733 percent increase in fraud between 2016 and 2019.
“As fraudsters grow ever more sophisticated, it’s critical that the tools used to detect and prevent fraudulent activities, such as account takeovers, become more sophisticated as well.
At FIS, we continue to invest in mobile offerings, cyber intelligence solutions and other advanced technologies that give financial institutions and their consumers the real-time intelligence they need to stay a step ahead of the criminals and protect their personal information and account data,” said Jim Johnson, Head of Financial Institutions Payments at FIS.
Pushing consumers from static passwords to safer authentication methods ranks among the study’s expert recommendations for financial service providers, merchants and other technology companies.
The data suggest that consumers are open to making this change but lack the motivation.
The latest findings point to the need for a marked shift in how financial service providers, merchants and technology companies fight the ever-evolving battle against fraud.
Because criminals are adapting to new technologies faster than consumers will adopt technology to reduce their risk, the financial services industry bears the burden of driving the changes, such as increasing usage of two-factor and biometric authentication and promoting tokenized digital wallets in order to reduce the crippling impact of fraud on the American public.
The annual Identity Fraud Report is a comprehensive analysis of identity fraud trends, independently produced by Javelin Strategy & Research.
The lead sponsors of this study are AARP, the nation’s largest nonprofit, nonpartisan organization dedicated to empowering people 50 and older; Allstate Identity Protection from Allstate, the nation’s largest publicly held personal lines insurer; and FIS, a global financial services technology provider.
The study is in its seventeenth consecutive year and is the nation’s longest-running study of identity fraud, with 85,000 consumers surveyed since 2003.
For more information, visit https://www.javelinstrategy.com