Identity fraud is the issue that won’t go away
In Javelin Strategy & Research’s & GIACT’s report titled “The Growing Costs of Identity Fraud”, the company reported that Identity fraud accounted to over US$16.8 billion in losses in 2018; a staggering amount that’s enough to get any consumer worried.
The worries are not unfounded as when it comes to identity fraud, it could happen to anyone at any time as personal information is widely shared these days. Banking information, personal identification, and even social media accounts are frequently being used and abused by irresponsible parties to bring about serious losses to people and corporations alike.
Too late when they find out
From the report, it appears that New Identity Fraud (NAF) cases, in particular, are rising as fraudsters get better at impersonating others and evading detection systems.
And often, the victims only come to know once they’re prompted about it. Of the people surveyed, 15 percent of the victims found out their identities have been stolen only after viewing their credit reports, while 13 percent found out they have been defrauded when debt collectors call.
Fraudsters are also creating fictitious identities (called Synthetic Identities) to draw more lucrative incomes. Fraudsters now find it easy to create accounts for a nonexistent person using the identities they’ve stolen to establish a seemingly legit credit history to take advantage of the credit lines that open after several months.
These numbers and the fact fraudsters could manipulate the banking system at their will, points to the weak cybersecurity infrastructures used by financial institutions to protect their clients; and this weakness is being abused by fraudsters every single minute.
The loss is real
Stolen identities spell big losses to corporations as it usually involves huge amounts of money or investments. With these fake identities, fraudsters apply for loans, credit cards and purchase properties under bogus names. In 2017, victims lost US$290 on average to fraudsters. Synthetic Identity frauds, on the other hand, accounted to more than US$6 billion in losses to credit card companies.
These fake identities don’t just cost money, it impacts productivity as well. It often takes a long time to resolve a case since it involves tedious processes and the law. In 2017, the fraudulent transaction had companies spending around 62.2 million hours to resolve these cases. These hours could have better spent on other marketing and advertising activities if they had a stronger system in place.
What can we do?
Al Pascual, SVP, Research Director and Head of Fraud & Security at Javelin Strategy & Research noted that the financial industry needs a new model in place to mitigate these issues.
He also said that the problem somehow lies in the old infrastructure that companies still use despite already having modern and more secure ones; “Most of the tools currently deployed are outdated and create vulnerabilities that savvy fraudsters can easily exploit.”
A similar view was echoed in our previous story. While the cybersecurity industry is well-aware of the issues at hand, the old infrastructure that’s still in use prevents these cybersecurity providers from rolling out implementations of newer security modules and policies.
So, the first thing to do is accept that what’s old needs to be replaced, and financial institutions need haste. “Identity and payments fraud are now impacting more consumers than ever before. Not only are incidences of true name and synthetic identity fraud increasing year-over-year, but the financial and human costs of identifying and remediating incidences of loss are also climbing”, says David Barnhardt, EVP of product at GIACT.
And the faster these institutions acknowledge and work on their weaknesses, the better it is for them as fraudsters get more proficient every day. “Companies across the payments ecosystem need to quickly bolster their defenses and adapt to the new severity of identity-based payments fraud,” David adds.