The cost of Synthetic Fraud Attacks Will Soar After the Pandemic

The cost of Synthetic Fraud Attacks Will Soar After the Pandemic

The price of synthetic fraud attacks will bounce back in the post-pandemic period, reveals a recent study.

A recent study by TransUnion identifies various instances of synthetic fraud as well as pending balances for critical, suspected fake accounts at the US financial institutions have declined drastically after the global pandemic was declared.

On the other hand, the recent analysis by Aite Group reveals that the cost of synthetic fraud will return in the post-pandemic era – reaching new heights. Today, synthetic identity fraud comprises attackers creating fictitious identities. They do it by piecing together false information and accurate identity attributes with the purpose to open fake accounts.

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The dip in the synthetic fraud incidents during the market uncertainty was a continuation of a previous study. In 2019, it was identified that synthetic fraud cases were slowing with the emergence of innovative solutions, that connect personal and digital identities.

Unexpectedly, synthetic fraud dropped markedly for different credit products. The analysis of outstanding balances attributed to suspected replica identities (for personal loans, credit card, retail credit card, etc.) found at their lowest levels ever since the quarter one of 2016.

As per the latest data (Q3 2020 data) by TransUnion, the fraud balances put up at $855 million in these industry verticals. This is down from $1.05 billion in Q3 2018. Besides, there was also many instances of dipping fraud actions for two consecutive quarters of 2020, i.e., Q2 and Q3.

During the third quarter of 2020, the percent of new credit card accounts and auto loans associated with a synthetic fraudster dropped to their lowest points – as the security researchers began tracking them in 2016.

There has been roughly 32% decrease in new credit cards and almost 23% decline for new auto loans linked to synthetic fraud. This is primarily from the period between Q3 2019 to Q3 2020. Away from the financial services, it determined that e-commerce and iGaming as the following sectors with the maximum amounts of synthetic fraud in 2020.

Regardless the radical drop in synthetic fraud in financial companies, the study indicates that the cost of such scams will surge in the coming years. The overall business losses due to the synthetic identity fraud (for unsecured US credit products) reached $1.8 billion in 2020, reveals Aite Group.

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This will continue up to $2.42 billion by 2023 – effectively valid for those that do not call for individuals or businesses to put up collateral for the loan. Clearly, synthetic fraud is an awfully tricky challenge to solve. Out of the financial services firms that were being surveyed, nearly 72% noted of believing synthetic identities as a much more critical challenge to address.

In essence, Shai Cohen, SVP of Global Fraud Solutions at TransUnion said, “We believe this slowdown was compounded by fraudsters who went elsewhere and could be lying in wait to take advantage of pandemic loan forbearance programs that may not have come due yet. Once synthetic fraud reemerges, which we think it will, companies must be ready.”

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