As More Transactions Shift Online During Pandemic, the Financial Services Industry Experiences a Surge in Fraudulent Activity...
June 24 2020 - 6:37AM
The COVID-19 pandemic has accelerated the move to digital within
the financial services industry, but with it has come an increased
propensity for fraudulent activity. A recent TransUnion (NYSE: TRU)
analysis found the percentage of risky worldwide transactions in
the financial services industry increased by 11% since early
March.1 TransUnion defines risky transactions as those that
have been denied or reviewed due to fraud indicators.
The new economic and workforce environment is likely
contributing to the growing numbers of potentially fraudulent
transactions. Banks and lenders are coping with a large workforce
migration to remote working conditions, branches are closed or have
limited access, and card-not-present (CNP) activity has increased.
Meanwhile financial institutions are quickly moving toward digital
channels and have experienced a dramatic 250% increase in digital
transactions.2
“The COVID-19 pandemic has created unique and unprecedented
challenges for the financial services industry, and has presented
many institutions with an increased fraud risk,” said Jason Laky,
executive vice president of financial services at TransUnion. “As
financial institutions increase their digital presence to support
consumers, it is imperative they have the right solutions in place
to seamlessly establish trust with customers while delivering
relevant, friction-right experiences.”
Identity Fraud Top Type in Financial
Services
This overall surge in fraud attacks has spanned many types of
fraud, however identity fraud was most prevalent for financial
services firms (a reported 23% increase in the TransUnion network).
Identity fraud can take nuanced forms such as synthetic identity
fraud, where fraudsters create fictitious identities by piecing
together real identity attributes and fake information with the
intent to open fraudulent accounts. It can also include identity
theft where fraudsters use stolen consumer identities they obtained
from a variety of techniques such as phishing.
Pre pandemic, lenders were ahead of the fraud curve and able to
mitigate risk. For example, one lender from an Aite Group study
cited an 8% decrease in fraud losses prior to COVID-19. In the
current climate the projection is closer to a 10-15% increase – a
nearly 20% deviation in fraud losses over the course of a few
months.3 While some lenders have made progress in reducing the
incidence of synthetic fraud in new credit card and auto loan
originations, it remains a serious issue as there is an estimated
$1 billion in outstanding balances to likely synthetic identities
across the auto, card and personal loan markets.
“Synthetic fraud continues to be one of the most prominent
problems in the financial services industry and one of the most
effective ways to reduce this type of fraud is to detect suspicious
patterns or attributes during the account opening and verification
process,” said Shai Cohen, senior vice president of global fraud
and identity solutions at TransUnion. “Lenders can easily
incorporate these red flags into their fraud detection models for
more comprehensive coverage while better protecting consumers.”
For example TransUnion’s analysis found that identifiable
information, such as an email address, can be a powerful predictor
of fraud. TransUnion’s flagship global identity verification and
fraud prevention solution suite, IDVision® with iovation®, has
found that characteristics of an email address such as account
longevity and velocity (frequency of transactions) can signify
potential fraud. Email accounts that were not recognized by the
fraud prevention suite had a significantly higher rate of
fraudulent activity with nearly one-third of these new accounts
engaging in transaction fraud.
IDVision® with iovation® unites personal and digital data into a
precise and accurate data identity. It verifies and authenticates
consumers, and enables users to prevent fraud. The solution suite
combines consumer credit history data with non-credit data and
digital device intelligence, resulting in superior insights that
are stewarded with care for consumer privacy, security and
compliance.
For more information on the rise of digital fraud in financial
services since the pandemic, please register for the webinar
Protecting Against Shifts in Digital Fraud. To learn more about
TransUnion’s fraud solutions, please visit
https://www.transunion.com/idvision.
About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company that
makes trust possible in the modern economy. We do this by providing
a comprehensive picture of each person so they can be reliably and
safely represented in the marketplace. As a result, businesses and
consumers can transact with confidence and achieve great things. We
call this Information for Good.®
A leading presence in more than 30 countries across five
continents, TransUnion provides solutions that help create economic
opportunity, great experiences and personal empowerment for
hundreds of millions of people.
http://www.transunion.com/business
1 TransUnion compared the percentage of risky transactions from
1/1/20–3/10/20 to 3/11/20 (the day the World Health Organization
declared COVID-19 a global pandemic) – 5/27/20.
2 Aite Group Study: Workplace Distancing: Adapting Fraud and AML
Operations to COVID-19
3 Aite Group Study: Workplace Distancing: Adapting Fraud and AML
Operations to COVID-19
Contact |
Dave
Blumberg |
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TransUnion |
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E-mail |
dblumberg@transunion.com |
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Telephone |
312-972-6646 |
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