Credit card losses from synthetic identity fraud jump
Aite Group forecasts the losses to rise 53 percent, to almost $1.3 billion, by 2020
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While some identity thieves aim to charge purchases to your card or use your personal information to secretly open new accounts in your name, other fraudsters are busy opening new credit cards in nobody’s name.
Research and advisory firm Aite Group has been tracking the volume of credit card losses from what’s called synthetic identity fraud since 2015, and also projects its magnitude three years forward. The trend? Decidedly rising.
Credit card losses from accounts opened with fabricated identities reached $820 million in 2017, up almost 17 percent from the year before. And Aite forecasts the losses to rise another 53 percent, to almost $1.3 billion, by 2020.
As large as those figures are, Aite considers the estimates to be fairly conservative, since synthetic identity fraud is especially hard to detect. With no victim notifying the financial institution of the incident, these thefts are often miscategorized as credit losses. Only if information comes through to indicate the account is held by a false identity is it properly reclassified as identity fraud.
Study author Julie Conroy indicates the growth in synthetic identity fraud has been driven by a combination of factors, including rampant data breaches, the loosening of credit standards by financial institutions, and the 2011 randomization of Social Security numbers, which has made it harder to spot ID numbers that don’t jibe with an applicant’s age or geography.
Add to that the massive retail migration to chip cards, which has very significantly deterred point-of-purchase fraud, and thieves are having to expand into different directions to keep their theft revenues flowing.
The estimates in Aite’s study are based on interviews with 33 executives from U.S. financial services firms and fraud vendors from July 2017 to April 2018. The findings were published May 3.
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