By Jeff Domansky, March 17, 2021
New research from Aite Group shows 47% of US consumers experienced financial identity theft (application fraud in their name or account takeover) in the past two years.
In 2019, losses from identity theft cases were $502.5 billion and rapidly increased to $712.4 billion in 2020, a 42% increase year-over-year.
The biggest and saddest surprise was more than half of account takeover (ATO) victims knew the person who took over their account.
Covid-19 created identity theft opportunities
The pandemic created new opportunities and new potential victims for fraudsters as many consumers shopped online, used contactless or card-not-present payments, or used digital payment and banking services more frequently or for the first time.
The most common forms of application fraud in the past two years included checking accounts (27%), credit cards (25%), mobile phone account (21%), health insurance plan (17%), utilities (14%), life insurance policy or annuity (14%), federal or state tax filings (14%), workplace 401(k) plan accounts (13%), investment accounts (13%), property or casualty insurance policies (12%), consumer loans (12%), an equity line of credit (11%), mortgage loans (10%), and filing for unemployment benefits (10%).
Unemployment benefits increased, and the length of time to draw unemployment grew, making them attractive online fraud targets.
Half of fraudsters known to victims
“It is sad but true that in many cases, identity theft victims know the person who used their identities to apply for new products, services, or benefits. In every case, at least half of the victims of every type of application fraud were victimized by a family member, friend, caregiver, or someone else they know,” the report noted.
Victims said family committed 43% and friends or caregivers 16% of checking account fraud. Family caused 34% and friends or caregivers 21% of fraudulent mobile account opening. Similarly, credit card fraud happened by family (32%) or friends or caregivers (21%) and consumer loans for boats, cars, or other products by family (29%), and friends or caregivers (31%).
Even filing your federal or state taxes wasn’t safe from family (27%) and friends or family (23%), nor were unemployment benefits, 26% and 25%, respectively.
Family and friendly fraud has grown in recent years and will continue to increase unless consumers learn how to secure their information, even within their own homes, the report said.
New habits opened new fraud opportunities
Consumers who were victims frequently tried new things, as 34% of those who suffered identity theft bought new products and services, and 37% tried new delivery channels.
“In the past two years, almost half (47%) of US consumers experienced identity theft. Well over one-third (37%) experienced application fraud (i.e., the unauthorized use of one’s identity to apply for an account). Over one-third (38%) of consumers experienced account takeover (i.e., unauthorized access to a consumer’s existing account),” researchers found.
For 30% of consumers, it took more than 100 hours to recover from their identity theft, and another 11% said recovery required between 41 and 100 hours.
Trust and fraud handling concerns linger
Although 60% of consumers said they were satisfied with the dispute process, many expressed frustrations about how providers handle their fraud.
Respondents who satisfied fraud victims most included credit cards (73%), mobile phones (70%), checking accounts (67%). Most dissatisfied or extremely dissatisfied application fraud victims were unemployment benefits (33%), consumer loans (32%), and federal or state tax account victims (32%).
Of those victims not satisfied, those unlikely or extremely unlikely to do business again included consumer loan account fraud (56%), checking accounts (49%), and credit cards (42%).
Companies and government organizations have a long way to go in how they treat fraud victims, satisfy their concerns, and help resolve problems.
Minimizing risk and raising awareness
Identity theft is a fast-growing problem for financial institutions, payment service providers, and merchants.
Aite Group points to some preventive steps that businesses can take to reduce fraud and raise awareness with consumers:
- Be proactive in upgrading the authentication of applicants and returning customers.
- Use physical and behavioral biometrics, digital identities that include device recognition, geofencing, and other new technologies to help authenticate consumers more reliably than passwords, knowledge-based questions, and third-party databases.
- Develop new procedures to assist individuals who dispute new accounts opened. Treating theft victims like criminals ensures they’re unlikely to ever do business with you in the future.
- Put robust, proactive fraud prevention and detection systems in place.
- Analyze fraud impact to make adjustments to your authentication procedures.
- Educate customers (especially digital newbies) about scams, family and friendly fraud, elder abuse, and other issues, so they avoid victimization.
The report concludes with one note of optimism. “The very best news for FIs is that the majority of consumers who tried new banking products and services or delivery channels in 2020 are likely to continue using them. At least 82% of consumers who used online or mobile banking for the first time in 2020 plan to continue to use the new delivery channel in the future.”
The digital tsunami will continue, and we can either ride the wave or get swept aside by not responding fast enough.
You can download a free copy of the Aite Group report US Identity Theft: The Stark Reality here.
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