Can increasing consumer interest in biometrics stem $43B lost to digital identity fraud in 2020?
The 2021 edition of the Identity Fraud Study was released by Javelin Strategy & Research, revealing $56 billion of losses caused by fraud in 2020, prompting consumers to reconsider biometrics and other ways to strengthen user authentication.
Out of the total losses, $43 billion was caused by digital identity fraud scams, and $13 billion by traditional identity fraud.
Commenting on the report findings, John Buzzard, lead analyst of Fraud & Security at Javelin, said the pandemic has caused a consistent shift in how fraudsters act, particularly online.
“Identity fraud has evolved and now reflects the lengths criminals will take to directly target consumers in order to steal their personally identifiable information,” Buzzard explained.
In fact, as customers were forced by lockdown restrictions to spend more time at home, they performed fewer in-person transactions, favouring instead spendings on streaming services, digital commerce and payments.
In addition, to maintain social distancing measures, these individuals also interacted with each other less in-person, and more via text and email.
The new trends consequently caused fraudsters to abandon their traditional criminal methods, and employ new, digital ones, aimed at interacting directly with their fraud victims via email and text messages.
“Criminals follow current events, and unfortunately the pandemic has provided them a host of new storylines to employ online,” said Kathy Stokes, director of the AARP Fraud Watch Network.
Many of the fraud attempts mentioned by those surveyed referred to economic stimulus payment, unemployment benefits, and identity fraud.
“Helping consumers know how to spot the red flags of scams is an important step in stopping fraud before it has a chance to happen,” she added.
However, according to the new study, many financial institutions struggled to keep up with this rapid increase in digital fraud attempts, with almost one-third of identity fraud victims claiming their banks did not resolve their issues.
The impact of these failed resolutions was severe, as the new data also shows that 38 percent of victims closed their accounts due to lack of resolution and fears of further economic losses.
To counter the increasing rate of these new forms of online criminal activity, the 2021 Identity Fraud Study suggests increasing consumer awareness of biometrics and other stronger forms of authentication.
“Static forms of consumer authentication must be replaced with a modern, standards-based approach that utilizes biometrics,” said David Henstock, vice president of Identity Products at Visa.
The point was echoed by Cindy White, chief marketing officer at Mitek, who mentioned the importance of consumer’s digital account engagement to adopt safer digital identity solutions.
“Consumers are willing to do their part to let go of traditional methods and leverage advancements in AI and new biometric technology such as facial scanning,” White said. “This is good news for them and for their financial institutions.”