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Number of victims up, amount stolen down

One in three data breach victims also lost money, says Javelin

Number of victims up, amount stolen down

Last year saw an increase of more than 500,000 fraud victims, to 13.1 million people, compared to the previous year—the second highest number since the study by Javelin Strategy & Research began.

Account takeover fraud hit a new record in incidence for the second year in a row and accounted for 28% of all identity fraud. Additionally, fraudsters increasingly turned to eBay, PayPal, and Amazon with the stolen information to make purchases.

In 2013, data breaches became more damaging, with one in three people who received a data breach notification letter becoming an identity fraud victim. Encouragingly, the amount criminals stole decreased by $3 billion to $18 billion, reflecting more aggressive actions from financial institutions, identity theft protection providers, and consumers.

According to Javelin statistics, 2013 was the fourth year in a row for increased numbers of stolen accounts: 2010--10.2 million; 2011--11.6 million; 2012--12.6 million; 2013--13.1 million. In that same period, total losses fluctuated: 2010--$20 billion; 2011--$18 billion; 2012--$21 billion; 2013--$18 billion.

Identity fraud is defined as the unauthorized use of another person’s personal information to achieve illicit financial gain. Identity fraud can range from simply using a stolen payment card account, to making a fraudulent purchase, to taking control of existing accounts, or opening new accounts, including mobile phone or utility services.

In October 2013, Javelin Strategy & Research conducted an address-based survey of 5,634 U.S. consumers to identify important findings about the impact of fraud, uncover areas of progress, and identify areas in which consumers must exercise continued vigilance.

“There were significant strides forward in 2013 in the fight against identity fraud. Even though the incidence of fraud increased, the amount stolen significantly decreased,” says Al Pascual, senior analyst of security, risk, and fraud. “Consumers and businesses cannot let up the effort. Our study found that criminals are adapting their approach to focus on account takeover and they are effective at using the information they secure from data breaches. Any complacency will provide fraudsters renewed opportunities.”

The study found several significant identity fraud trends:

• More victims, less stolen—The number of identity fraud incidents increased by 500,000 consumers over the past year, while the dollar amount stolen decreased to $18 billion, significantly lower than the all-time high of $48 billion in 2004. Those between 35-44 were at greatest risk. When successful, fraudsters are now more than three times as likely to use the money stolen to buy prepaid or gift cards to make fraudulent purchases.

• Types of fraud changed; account takeover rose dramatically—Criminals are changing behavior to exploit vulnerabilities. Most tellingly, account takeover hit a new record in incidence for the second year in a row and accounted for 28% of identity fraud losses. Account takeovers for utilities and mobile phone fraud nearly tripled, as fraudsters add new properties to victims' utility accounts and run up unauthorized charges using "premium" texting services. Consumers who are victims of account takeover tend to start paying bills online to improve security.

• Data breaches are the greatest risk factor for identity fraud—In 2013, one in three consumers who received notification of a data breach became a victim of fraud. This is up from one in four in 2012. Forty-six percent of consumers with breached debit cards in 2013 became fraud victims in the same year, compared to only 16% of consumers with a Social Security number breached.

• Identity fraud is more than just credit card fraud—Specifically, noncard fraud saw a rapid rise in 2013. The number of noncard fraud victims nearly tripled and it accounted for $5 billion in fraud. This fraud includes: compromised lines of credit, internet accounts (e.g., eBay, Amazon), and email payment accounts such as PayPal.

Now in its eleventh consecutive year, the comprehensive analysis of identity fraud trends is independently produced by Javelin Strategy & Research and made possible by Intersections Inc. It is the nation’s longest-running study of identity fraud, with 53,800 respondents surveyed over the past 11 years.

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at [email protected]

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