With the rise of e-commerce and digital payments during the COVID-19, new research by TransUnion shows fraudsters are also getting in on the action.
The recent report showed an 11% increase worldwide in risky fraud transactions it defined as denied or reviewed because of fraud indicators.
Banks and lenders are coping with security challenges because of a 250% increase in the volume of online transactions as well as the problem of managing company security for millions of new remote employees, often without the usual corporate cybersecurity safety net.
“The COVID-19 pandemic has created unique and unprecedented challenges for the financial services industry and has presented many institutions with increased fraud risk,” said Jason Laky, executive vice president of financial services at TransUnion. “As financial institutions increase their digital presence to support consumers, it is imperative they have the right solutions in place to seamlessly establish trust with customers while delivering relevant, friction-right experiences.”
Identity fraud top concern
Biggest among business concerns of financial customers in the TransUnion network is a 23% increase in identity fraud including synthetic identity fraud where fraudsters create fictitious identities by piecing together real identity attributes and fake information to open fraudulent accounts. Also growing is identity theft where fraudsters use stolen consumer identities from a variety of techniques such as phishing against employees and customers.
An Aite Group study cited an 8% decrease in fraud losses prior to COVID-19 but TransUnion estimates a 10-15% increase in new fraud losses during the pandemic with an estimated $1 billion in synthetic fraud balances across the auto, card, and personal loan segments of the market.
“Synthetic fraud continues to be one of the most prominent problems in the financial services industry and one of the most effective ways to reduce this type of fraud is to detect suspicious patterns or attributes during the account opening and verification process,” said Shai Cohen, senior vice president of global fraud and identity solutions at TransUnion. “Lenders can easily incorporate these red flags into their fraud detection models for more comprehensive coverage while better protecting consumers.”
Fraud indicators & solutions
Emails are a strong indicator of potential fraud if companies have the proper monitoring tools in place. For example, Trans Union’s IDVision® suite with iovation® examines characteristics of an email address such as account longevity, velocity (frequency of emails sent in a period of time), and normalization (special character usage to avoid detection). These features can indicate potential fraud.
Email accounts not recognized by the TransUnion fraud prevention suite showed nearly one-third of these types of new accounts engaged in transaction fraud. Combining personal credit histories with digital data helps financial providers verify and authenticate customers quickly, accurately, and unobtrusively.
You can learn more about financial fraud and TransUnion’s COVID-19 fraud prevention strategies and product solutions here.
Author: Douglas Hall is publisher of PaymentsNEXT and a leader in the global payments industry.
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