A new report from Javelin Strategy & Research suggests that financial institutions are failing to keep pace with fraudsters. While the overall number of fraudulent incidents went down between 2018 and 2019 (from 14.4 million to 13 million), the average attack has become more lucrative, leading to a 15 percent increase (to $16.9 billion) in year-over-year fraud losses.
However, what may be even more concerning is that much of that loss is being transferred directly to consumers, who shouldered $3.5 billion in out-of-pocket costs. Much of that can be attributed to the rise in account takeover fraud, which was up 72 percent for the year. Fraud is also increasing on peer-to-peer payment systems, jumping 733 percent between 2016 and 2019.
“Scammers are adept at capitalizing on current events and new platforms,” said AARP Director of Fraud Prevention Kathy Stokes. “Using payment apps for anything other than sending money to someone you know presents significant fraud risk for consumers and financial institutions.”
The report advises financial institutions to implement better authentication and fraud detection technology to help combat the latest trends. Potential solutions include biometric authentication, two-factor authentication, and tokenization, all of which can eliminate some of the vulnerabilities associated with static passwords.
“These findings should be a wake-up call for financial institutions, the payments industry, businesses and consumers,” said Javelin Head of Fraud Krista Tedder. “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.”
Javelin notes that the speed of account takeover fraud can make it more difficult to monitor, with 40 percent of the fraudulent activity taking place within a day of the initial takeover. The report itself arrives in the midst of the COVID-19 pandemic, which has coincided with an uptick in social engineering and account takeover attacks as fraudsters try to take advantage of the disruption caused by the coronavirus.
The AARP, Allstate Identity Protection, and FIS sponsored the 2020 Identity Fraud Report.