Rippleshot Blog

The Rise of Identity Fraud: The Multi-Billion Dollar Problem

Posted by Anna Kragie on 29, Jun, 18

Identity fraud doesn't discriminate when it comes to age. 

New research from Javelin indicates that more than 1 million children were victims of identity theft in 2017, which amounted to roughly $2.67 billion in losses. Within those figures, the report found that a majority (two-thirds) of the kids impacted were under the age of eight, while 20 percent were between 8-12 years old.

What's contributing to this increase? And why is this trend becoming increasingly problematic for financial institutions? 

While most of the reports on ID theft fraud focus on how it impacts adults, and their ability to open up new lines of credit and maintain their credit scores, there is an even more troubling outcome when children’s identities get tangled in the mess. This is mainly because these identities can be breached for many years before a problem is actually realized. By the time they are ready to join the financial ecosystem, they’ve already got a fraud-filled identity crisis to clean up. 

“This is just the tip of the iceberg; odds are there were far more than a million victims last year,” Al Pascual, Javelin's senior vice president for research, wrote in the report. Children are  “an extremely vulnerable population with minimal ability to protect itself.”

Javelin’s research also shares some key insight into how data breached impact children. In 2017, 39 percent of those children that had personal information breached became fraud victims. This is significantly higher than the adults in the same category. Of adults who were notified about a breached, 19 percent became fraud victims. The fraud difference between children and children is attributed to the fact that the children’s personal information is less likely to be associated with financial details such as credit applications or other key details needed to run a new credit report.

As social security numbers gets sold on the dark web for less than the cost of a fast food meal, it’s getting easier and easier for fraudsters to breach identities and leverage sensitive personal details to commit deeper levels of fraud.

“Children are more likely to become fraud victims after a breach because their core identity elements, like Social Security numbers, are more valuable for criminals,” Pascual told NBC News. “Criminals can have a field day with a child’s identity information because it’s never been used before. When a bank or other company pulls a credit report, they’re not going to find anything, and so the criminal has a clean pallet to work on.”

Related Fraud Data

Industry data also highlights another troubling trend: The rise of account takeovers. A new report indicates that account takeovers jumped by 300 percent in the 2017, which brings losses to more than $5 billion. This report also exposes just how expensive this is to victims of this type of fraud. In 2017 alone, people paid roughly $290 out of pocket. More than just money, those same consumers also spent roughly 15 hours resolving the matter.

What's contributing to this rise is also the ability for cyber criminals to gain access to bank accounts easier than a credit card. Much like credit card details, bank account credentials are being sold across the dark web at a rapid pace. This has made it increasingly possible for hackers with any level of training to commit account takeover fraud. The availability of financial credentials across the dark web has also helped fraudsters commit account takeover on a larger scale.

What This Data Means For Financial Institutions

As data breaches and identity fraud continue to become a bigger problem across the financial ecosystem , it's clear that FIs need faster, better fraud detection that can help them proactively combat the spread of the many types of fraud that's become all too common today. While fraudsters continue to capitalize on vulnerabilities that exist across the payments, retail and financial industries, these problems are going to continue to be exacerbated at a rapid pace.  It's up to financial institutions and organizations to invest in better fraud detection measures that can spot troubling patterns as they occur.