As Identity Fraud Losses Soar, Institutions and Consumers Must Meet Evolving Threats Head-On

This article in the first in a three-part series detailing the landscape of identity fraud and scams in the United States.

Identity fraud losses increased an eye-watering 79% in 2021, totaling $24 billion (USD) and racking up 15 million U.S. casualties, according to new data from Javelin Strategy & Research’s 2022 Identity Fraud Study: The Virtual Battleground . Additionally, 27 million U.S. consumers were victimized by identity fraud scams that totaled a further $28 billion. When combined, identity fraud losses totaled $52 billion and affected 42 million U.S. consumers.

Now in its nineteenth year, the annual Identity Fraud Study tracks consumer identity fraud losses and analyzes emerging trends in the landscape.?

In 2021, identity fraud victims reported an average loss of $1,551 (USD), increasing $201 (USD) from 2020. Pandemic-related consumer habits contributed as consumers increasingly relied on digital transactions for everything from streaming and shopping to banking and medical care. Criminals, in turn, have taken advantage of the rich potential of the virtual environment to target consumers.?

Consumers and institutions alike are scrambling to keep up with rapidly-changing strategies. Increasingly, criminals are turning to schemes that aim to start or seize accounts from users. As consumers expand their digital footprint, they expose new vulnerabilities. In many cases, criminals need only to target identity fraud victims once to gain almost limitless access to a consumer's resources and information.

• Account takeover losses spiked dramatically in 2021. Despite the development of new fraud prevention technologies in the industry, ATO losses ramped up $11 billion (USD) in losses, a 90% increase.
• Criminals used broad strokes to seek out consumer information linked to financial accounts. Non-card-based fraud involving checking or savings, insurance or utilities–increased 73%, ballooning to $8 billion (USD).
• Existing card fraud increased by 69%, costing consumers who experienced credit card fraud on existing accounts a total of $9 billion (USD).
• New account fraud soared in 2021. 5 million new account fraud (NAF) victims lost a total of $7 billion (USD). Consumers lost time, too, spending an average of 16 hours resolving new account fraud issues by substantiating their lack of liability to creditors for debts they didn't incur.

While identity fraud victims increased by 5 million, or 50%, in 2021, technological advances promise some relief to consumers–if they will adapt to safer personal business habits.

On the consumer's part, poor digital hygiene makes up a portion of the picture. As transactions increasingly take place online, consumers lean heavily on static passwords and unencrypted browsing sessions, making themselves vulnerable to attack by opportunistic criminals.?

On the business enterprise side, an increase in password less authentication practices and investment in fraud detection efforts would help minimize the threats posed by lax consumer habits. Financial institutions can begin to liberate themselves from dependence on static passwords simply by layering solutions that leverage global trust for devices and personas, including biometric authentication.

Consumers demonstrated enthusiasm towards biometrics. In 2021, fingerprint scanning, facial recognition and retinal scanning boasted 70% or higher trust rankings. Financial service providers have much to gain from investing in advanced authentication techniques to stem consumer dependence on static passwords.

As identity fraud becomes more sophisticated, financial service institutions must outpace criminals with sophisticated fraud prevention solutions suitable for the ever-evolving virtual battleground.?

Stay tuned for the second installment in this three-part series, in which Javelin will explore the portrait of the typical identity fraud victim.