09/27/2020

Deep Dive: How Identity Fraud Targets Banks

PYMNTS.com

Fraudsters leverage an array of schemes to conduct financial crimes, including digital methods like botnets and brute force hacks as well as old-school ones like social engineering. One of the most pervasive — which also affects customers as much as or more than banks — is identity theft. This tactic can do more than just compromise customers’ bank accounts: It can also cost them untold hours by forcing them to meticulously change their account passwords and contact customer service to have fraudulent charges revoked.

This damage done to banks as well as the customers they serve has forced financial institutions (FIs) and security companies to make curbing identity theft a top priority. However, identity theft methods are as numerous as they are diverse, ranging from trial-and-error password checks that fraudsters use to test stolen identities purchased in bulk to opening accounts or applying for loans with fictitious identities. The following Deep Dive explores the myriad identity fraud schemes that bad actors harness as well as the technologies that banks are leveraging to keep them at bay.

Methods Of Identity Theft

Identity theft is well-known to Americans, who have been educated their entire lives to keep their personal data secure so strangers cannot impersonate them. Data shows that U.S. consumers made approximately 651,000 identity theft complaints in 2019, consisting of credit card fraud, mobile phone account fraud, impersonations for personal loans and a host of other scams. The rate of identity theft fell by 24 percent from 2015 to 2017, but it skyrocketed 46 percent from 2018 and 2019. Fraudsters used these stolen credentials to pilfer $16.9 billion last year, up 15 percent from 2018.

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