Portrait of a Victim

This post is the second in a three-part series detailing the landscape of identity fraud and identity fraud scams in the United States.?

Identity fraud flourished during the pandemic, with a surge in digital transactions providing a fertile landscape for cybercriminals. In 2021, identity fraud racked up $52 billion (USD) in losses and claimed 42 million victims–one in six U.S. adults.

Javelin Strategy & Research’s new identity fraud study, The Virtual Battleground , uncovered record-breaking losses and troubling new trends that included considerable increases in account takeover fraud and new account fraud.

While the financial implications of identity fraud can be tracked and measured, the emotional toll on consumers is harder to quantify. Identity fraud leaves a lasting mark on victims, who often report feeling let down by their primary financial institutions (PFIs) when they fail to offer adequate recovery support. This presents an additional risk to the banking relationship when consumers become more disenfranchised with the service and fraud resolution experience.?

Traditional Identity Fraud on the Rise

Following a surge in identity fraud scams in 2020, 2021 saw criminals return to pre-pandemic tactics, using bots and malware to target consumers in the virtual environment. In 2021, traditional identity fraud losses—those involving the use of a consumer's personal information to achieve illicit financial gain—skyrocketed. Javelin found that identity fraud amounted to $24 billion (USD) in 2021, with more than 15 million U.S. adults impacted.?In 2021, the average per-victim loss from traditional identity fraud was $1,551. On average, victims spent nine hours resolving identity fraud issues.?

Against this turbulent landscape, consumers expressed high expectations of their primary financial institutions. Data from the report demonstrates that most consumers expect their bank to make them whole again after a loss. Many victims voiced frustration with lagging fraud claim reporting and case tracking systems that kept them in the dark.?

Consumers also expressed an appetite for fraud protection and education resources, with over 50% of victims saying they wanted their banks to offer a fraud prevention resource center.

Identity Fraud Scams Still Going Strong

While falling short of 2022's meteoric highs, identity fraud scams continued to plague consumers in 2021. Javelin research uncovered identity fraud scam losses of $28 billion, which victimized 27 million U.S. consumers and claimed an average of $1,029 per victim.

Javelin defines an identity fraud scam as any action taken by a criminal to influence a consumer to divulge personal information directly. Identity fraud scams can occur face-to-face or via phone, text or email contact. Unlike traditional identity fraud, victims of scams can often identify the exact moment or exchange that set their loss in motion.

Since identity fraud scams thrive on uncertainty, consumers navigating new digital environments are ideal marks. In 2021, for example, online purchase scams flourished as criminals used consumer’s user credentials to make illicit purchases in the eCommerce channels. Fraudulent online purchases accounted for 32% of identity fraud scams in 2021, up from 30% the previous year.

Prevention Over Cure

With identity fraud scams still posing a significant threat and traditional identity fraud increasing, consumers should arm themselves with information, taking advantage of the fraud education and prevention resources that most major banks offer.?

While identity fraud attempts and scams are constantly evolving, the actions consumers can take to protect themselves are simple, effective and free. Consumers should make a habit of the following:

• Regularly review and update contact information on file with service providers. This allows banks and service providers to quickly alert customers to suspicious activity.
• Use unique passwords for every account. Repeated user credentials play into the hands of criminals, who can use one set of information to access multiple accounts. Instead, consumers should pick unique, complex passwords for every account, using a combination of uppercase and lowercase letters, symbols and numbers.
• Freeze individual credit profiles. Consumers can control when reporting agencies release information on their credit, preventing criminals from accessing their data.

An Evolving Threat

The evolution of the identity fraud landscape in 2021 demonstrates the importance of guarding against traditional approaches, even as new strategies emerge.?

As the efficacy of identity fraud scams declined in 2021 following an uptick in consumer education, criminals quickly reverted to conventional data harvesting tactics like credential stuffing–the automated injection of stolen username and password pairs to gain access to existing accounts.

The rapid increase of fraudulent account creation and takeover is likely to continue in 2022 unless institutions invest in targeted efforts to safeguard consumer information. PFIs must work hard to maintain the trust of their customers, as banks and consumers will need to work hand-in-hand to combat growing threats.?

Enhanced consumer education to nurture safe online habits is critical–as are improved fraud resolution efforts to maintain victims' confidence when they are at their most vulnerable. The stronger the understanding of existing and potential threats, the better-equipped consumers will be to operate and transact safely in the digital environment.

Stay tuned for the third installment in this three-part series, in which Javelin will outline the economic impact fraud has in the United States.