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,” said Krista Tedder, Head of Fraud with Javelin Strategy & Research. “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.”
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,” said Kathy Stokes, AARP Director of Fraud Prevention Programs. “Using these payment apps for anything other than sending money to someone you know presents significant fraud risk for both consumers and financial institutions.“
“Every day, millions of Americans exchange their personal information for convenience,” said Jason Park, Chief Growth Officer, Allstate Identity Protection. “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.”
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,” said Jim Johnson, Head of Financial Institutions Payments at FIS. “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.”
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.
To learn more about the 2020 Identity Fraud Report, visit https://www.javelinstrategy.com/coverage-area/2020-identity-fraud-study-genesis-identity-fraud-crisis.
About Javelin
Javelin Strategy & Research, a business unit of Escalent, helps its clients make informed decisions in a digital financial world. It provides strategic insights for financial institutions, government, payments companies, merchants, fintechs and technology providers. Javelin’s independent insights result from a rigorous research process that assesses consumers, businesses, providers, and the transactions ecosystem. It conducts in-depth primary research studies to pinpoint dynamic risks and opportunities in digital banking, payments, fraud & security, and lending. For more information, visit https://www.javelinstrategy.com. Follow us on Twitter and LinkedIn.
About Escalent
Escalent is a top human behavior and analytics firm specializing in industries facing disruption and business transformation. Escalent acquired Javelin Strategy & Research in December 2019. As catalysts of progress for more than 40 years, Escalent tells stories that transform data and insight into a profound understanding of what drives human beings. And it helps businesses turn those drivers into actions that build brands, enhance customer experiences and inspire product innovation. Visit escalent.co to see how it is helping shape the brands that are reshaping the world.
About AARP
AARP is the nation’s largest nonprofit, nonpartisan organization dedicated to empowering Americans 50 and older to choose how they live as they age. With nearly 38 million members and offices in every state, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, AARP works to strengthen communities and advocate for what matters most to families with a focus on health security, financial stability and personal fulfillment. AARP also works for individuals in the marketplace by sparking new solutions and allowing carefully chosen, high-quality products and services to carry the AARP name. As a trusted source for news and information, AARP produces the nation’s largest circulation publications, AARP The Magazine and AARP Bulletin. To learn more, visit www.aarp.org or follow @AARP and @AARPadvocates on social media.
About Allstate Identity Protection
Allstate Identity Protection, formerly InfoArmor, is the nation’s leader in employee identity protection. We joined the Allstate Corporation family of companies in 2018, and together have 100 years of combined experience protecting what people care about most. In addition to servicing more than 3 million employees across 3,000+ clients, including around a third of the Fortune 500, we aim to bring peace of mind to all Americans via our direct-to-consumer product and channel partnership program.
About FIS
FIS is a leading provider of technology solutions for merchants, banks and capital markets firms globally. Our over 55,000 people are dedicated to advancing the way the world pays, banks and invests by applying our scale, deep expertise and data-driven insights. We help our clients use technology in innovative ways to solve business-critical challenges and deliver superior experiences for their customers. Headquartered in Jacksonville, Florida, FIS is a Fortune 500® company and is a member of Standard & Poor’s 500® Index.
To learn more, visit www.fisglobal.com. Follow FIS on Facebook, LinkedIn and Twitter (@FISGlobal).
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