“Losses due to identity theft increased by 42% from 2019 to 2020 primarily due to the COVID-19 pandemic. Aite Group estimates that losses from identity theft will grow to US$635.4 billion by 2023.” (1)
Yes, you read that right. Fraud losses due to identity theft are projected to reach $635B, with a “B.” To put it another way, identity fraud generates more revenue for fraudsters annually than any business in the world. Even Walmart only did $559B in revenue in 2020 compared to the estimated $712.4B in reported identity theft fraud losses, a 27.4% difference.
Identity theft and fraud are big business with no single solution to combat fraud. To address fraud challenges, companies benefit the most by taking a layered approach.
Criminal Enterprise and the Fraud Landscape
When we say identity theft is big business there’s a reason for that. Like any enterprise or corporation, criminal fraud rings can have a variety of departments and employees with a wide range of skill sets. It’s no longer a hacker hiding in the basement with a few computers trying to steal someone’s identity.
The stealing of a consumer's identity is also usually only the first step in the process. Once an identity has been compromised it can be used repeatedly in varying scenarios. Fraudsters may use the stolen ID's to build synthetic identities or test for potential flaws in the system. The ID’s are then sold or transferred to someone else who scales up activity to take advantage of the previously identified flaws. Or, in the case of synthetic identities there's a bust out moment. Once the ill-gotten gains are received the goods are sold, money is transferred, and funds are embezzled accordingly.
In many respects fraud often is well-orchestrated. If businesses are going to keep up they have to understand the impact of fraud on the consumer journey.
Fraud Across the Consumer Journey
From discovery, to acquisition, to consumer engagement to recovery there is the potential for fraud. “Research shows that 60% of consumers intentionally provide incorrect information when submitting their personal details online.” (Marketing Week, Consumers are ‘dirtying’ databases with false details). Also, there’s just as much intentional fraud throughout the journey:
- Discovery: Consumers provide fake information to get access to discounts or deals that they may not normally qualify to receive.
- Acquisition: Whether it’s 1st party loan stacking, 3rd party synthetic identity’s, or many other types of fraud, acquisition is often where the greatest risk lies.
- Engagement: Account take-over, fraudulent transactions, illegal transfers, and more. Next to acquisition this is the second greatest area of risk.
- Recovery / Retention: Even at the end of the consumer lifecycle there’s still the potential for fraud. For fraudsters that may have slipped through the cracks there’s still that break-out moment.
Layered Approach to Fraud
Just as fraudsters attack every stage of the consumer's journey it’s important for businesses to take a layered approach in different solutions at the various stages to help eliminate the gaps.
- Discovery: Compare the information the consumers provides with known information.
- Acquisition: Compare consumers information with known information. Make them confirm they are who they say they are. Check for potential fraud. Make sure you are not listed on sanctions / watch list, and that you are not prohibited from transacting business with them.
- Engagement: Having the consumer authenticate themselves can help combat most forms of fraud. In addition, analyzing the transaction or evaluating the consumers digital behavior adds an extra layer of protection.
- Recovery / Retention: Performing regular portfolio reviews or assessing a consumers identity is fundamental when a new offer is presented to existing customers.
Again, there’s no such thing as a single solution. Although, when the right methods are introduced at the right stage of the consumer journey, businesses are able to reduce fraud risk. In one instance an Equifax customer recognized a 73% reduction in fraud risk due to address discrepancies. Can you do the same? For more information visit Equifax.com fraud solutions and contact us today.
(1) Aite - U.S. Identity Theft: The Stark Reality of Fraud, March 2021