TransUnion Analysis Finds Fraud Costing Businesses Equivalent of Nearly 7% of Revenues

Rhea-AI Summary

TransUnion's H2 2024 Update to the State of Omnichannel Fraud Report reveals significant fraud impacts on businesses globally. Key findings include:

• Business leaders report fraud losses equivalent to 6.5% of revenue, totaling $359 billion among surveyed organizations
• 75% of respondents noted fraud stayed the same or increased year-over-year
• Scam/authorized fraud was the most common cause of fraud loss
• Global rate of suspected Digital Fraud remained high at 5.2% of all transactions
• Synthetic identity lending exposure reached an all-time high of $3.2 billion in H1 2024
• Auto loan industry most impacted by synthetic identity exposure at $2.0 billion
• Communities industry (online forums, dating sites) experienced the largest percentage (11.5%) of suspected Digital Fraud globally

Positive

• TransUnion's fraud analysis provides valuable insights for businesses to improve their fraud prevention strategies
• The report covers a wide range of industries and regions, offering a comprehensive view of global fraud trends

Negative

• Fraud losses equivalent to 6.5% of revenue reported by surveyed business leaders, totaling $359 billion
• 75% of respondents noted fraud stayed the same or increased year-over-year
• Global rate of suspected Digital Fraud remained high at 5.2% of all transactions
• Synthetic identity lending exposure reached an all-time high of $3.2 billion in H1 2024
• Auto loan industry exposure to synthetic identities increased to $2.0 billion
• Communities industry experienced 11.5% suspected Digital Fraud rate, a 23% increase over H1 2023

Insights

Financial Analyst

The TransUnion report reveals significant financial impacts of fraud on businesses, with global losses averaging 6.5% of revenue, equivalent to $359 billion among surveyed companies. In the U.S., losses reached 6.7% of revenue, totaling $112 billion. This widespread issue affects various industries, with the gaming sector experiencing the highest rate of suspected digital fraud at 13.3% of transactions.

Of particular concern is the record-high lender exposure to synthetic identities, reaching $3.2 billion in H1 2024, a 7% YoY increase. The auto loan industry is most impacted, accounting for $2.0 billion of this exposure. This trend suggests potential future challenges with charge-offs and credit quality for lenders, especially in the auto sector.

For TransUnion (TRU), these findings could drive increased demand for their fraud prevention services, potentially boosting revenue. However, the persistent high fraud rates may also indicate challenges in completely mitigating these risks, which could impact client satisfaction and retention. Investors should monitor how effectively TRU can capitalize on this market need while demonstrating the efficacy of their solutions in reducing fraud rates for clients.

Cybersecurity Expert

The report highlights alarming trends in digital fraud, with a global suspected rate of 5.2% across all transactions in H1 2024. The rise in synthetic identity fraud, increasing by 153% from H2 2023 to H1 2024, is particularly concerning. This sophisticated form of fraud poses significant challenges for traditional identity verification methods.

The communities industry, including online forums and dating sites, faces the highest risk with 11.5% of transactions suspected as fraudulent. This 23% YoY increase underscores the evolving nature of online threats and the need for more robust security measures in social platforms.

For TransUnion, these trends present both opportunities and challenges. Their TruValidate suite could see increased adoption as businesses seek to bolster their fraud prevention capabilities. However, the persistent high fraud rates also indicate that current solutions may not be fully effective, suggesting a need for continued innovation in fraud detection and prevention technologies. TRU's ability to stay ahead of these evolving threats will be important for maintaining its market position and driving growth in its fraud prevention business segment.

Three in four business leaders indicated fraud stayed the same or increased in the past year; synthetic identity lending exposure reaches all-time high

CHICAGO, Oct. 16, 2024 (GLOBE NEWSWIRE) -- A global TransUnion (NYSE: TRU) analysis found that fraud continues to significantly impact businesses and their bottom lines. The newly released H2 2024 Update to the State of Omnichannel Fraud Report, which explores fraud trends in the first half (H1/January 1-June 30, 2024) of this year, also found that the lender risk exposure to synthetic identities for U.S. auto loans, bank credit cards, retail credit cards and unsecured personal loans reached their highest point ever.

Among the key findings in the report were the results of a TransUnion survey of more than 800 business leaders in Canada, India, the U.K. and the U.S. which revealed total fraud losses of 6.5% equivalent of their companies’ revenue. This totaled approximately $359 billion among these business leaders’ organizations, a number which projects out exponentially greater when considering these represent only a small percentage of business leaders. Among those surveyed in the U.S., they said their company lost the equivalent of 6.7% of their revenue due to fraud over the past year, totaling $112 billion.

In addition, 75% of the global survey respondents said that every type of fraud they measured stayed the same or increased year-over-year (YoY). Nearly half of respondents indicated that scam/authorized fraud, wherein a person is tricked into giving up something of value, saw the greatest YoY increase. It was also the most common cause of fraud loss according to global respondents at 31% and US respondents at 35%. In fact, in the U.S., this was more than double the next most common cause of fraud losses – synthetic identity fraud at 17%.

“Protecting customers and their businesses from fraud is essential to enabling safe and tailored consumer experiences. These findings reveal that despite the good-faith efforts that are being undertaken by global organizations to identify and prevent fraud to date, fraudsters continue to evolve and it’s vital that fraud prevention methods keep up with the changing times,” said Steve Yin, global head of fraud at TransUnion. “Business that aren’t already doing so should ensure that they are taking advantage of fraud prevention technologies such as identity verification, IP intelligence, device reputation and synthetic identity detection as critical components of their fraud prevention programs.”

According to proprietary insights from TransUnion’s global intelligence network, the global rate of suspected Digital Fraud remained stubbornly high in H1 2024 at 5.2% of all transactions. For transactions where the consumer was located in the U.S., 4.6% of digital transactions were suspected to be fraudulent over the period. Breaking it down by the industry, the highest rate of suspected Digital Fraud for transactions where the consumers were in the U.S. was the gaming sector, for which 13.3% of all transactions in that industry were suspected to be fraudulent in H1 2024.

Synthetic Identity Lending Exposure Reaches New Record High

Potentially driven in part by the wealth of stolen identities acquired via data breaches, accounts opened using synthetic identities continue to put lenders at risk. In fact, the increases among overall lender exposure to synthetic identities for US auto loans, bank credit cards, retail credit cards and unsecured personal loans continued in H1 2024. TransUnion documented such exposure rising from $3.0 billion in H1 2023 to $3.2 billion in H1 2024, an all-time high and growth of 7% YoY. The share of accounts opened for the four tradelines by synthetic identities rose 18% YoY, also reaching an all-time high.

The auto loan industry continued to be the most impacted by lender exposure to synthetic identities among the four tradelines, accounting for $2.0 billion of the total in H1 2024, the fourth consecutive first half of the year in which auto has seen the greatest exposure. In fact, since surpassing bankcards in H1 2021, auto loan exposure is now double that of bankcard, which is currently at $1.0 billion.

“Fraudsters are increasingly using synthetic identities to accumulate balances, particularly targeting the auto industry,” said Yin. “Unfortunately, this warrants attention to as the market is now facing a rising threat of charge-offs.”

Lender Exposure to Synthetic Identities Continues to Trend Upward, Led by Auto

	End of H1 2020	End of H1 2021	End of H1 2022	End of H1 2023	End of H1 2024
Auto Loans	$871M	$869M	$1.3B	$1.8B	$2.0B
Bankcards	$966M	$783M	$951M	$1.1B	$1.0B
Retail Credit Cards	$250M	$183M	$157M	$145M	$121M
Unsecured Personal Loans	$48M	$36M	$57M	$57M	$52M
Totals	$2.1B	$1.9B	$2.4B	$3.0B	$3.2B

Source: TransUnion TruValidate™ data

The percentage of newly-opened accounts connected to synthetic identities has also seen a steady rise since 2020, and in H1 2024 stood at 0.20% of all accounts associated with the four tradelines in the table above. The tradeline with the highest percentage in H1 2024 was bank card, which was at 0.33% for the period, followed closely by auto loans at 0.27%.

Industry Perspective: Online Forums and Dating Sites Most Impacted by Digital Fraud in H1 2024

In H1 2024, the communities industry – which includes web properties like online forums and dating sites – experienced the largest percentage (11.5%) of suspected Digital Fraud globally. This represents a 23% increase over H1 2023. TransUnion’s communities customers reported profile misrepresentation as the most frequent type of fraud they witnessed in H1 2024. Not surprisingly, the communities industry had the highest suspected Digital Fraud rate in seven of the 19 countries and regions analyzed in H1 2024.

In terms of global volume, synthetic identity fraud was the fastest-growing Digital Fraud type across industries from H2 2023 to H1 2024, increasing by 153%. Electronic fund transfers fraud saw the highest YoY growth, up 113% from H1 2023 to H1 2024. However, promotion abuse, which is defined as consumers or fraudsters taking advantage of marketing offers to receive unintended financial incentives, was the most common Digital Fraud type globally in H1 2024, with 3.6% of Digital Fraud reported to TransUnion by its customers.

TransUnion came to its conclusions about Digital Fraud based on intelligence from its identity and fraud product suite that helps secure trust across channels and delivers efficient consumer experiences – TransUnion TruValidate. The rate or percentage of suspected Digital Fraud attempts reflect those that TransUnion customers determined met one of the following conditions: 1) denial in real time due to fraudulent indicators, 2) denial in real time for corporate policy violations, 3) determined to be fraudulent upon customer investigation, or 4) determined to be a corporate policy violation upon customer investigation —compared to all transactions it assessed for fraud. 

Download the TransUnion H2 2024 Update to the State of Omnichannel Fraud Report to learn more. Specific country and regional data in the report include the United States, Botswana, Brazil, Canada, Chile, Colombia, the Dominican Republic, Hong Kong, India, Kenya, Mexico, Namibia, the Philippines, Puerto Rico, Rwanda, South Africa, Spain, the United Kingdom and Zambia.

For more information and insights about the global fraud trends, please download the report. Consumers who believe they may be a victim of fraud can find resources and information here.

About TransUnion (NYSE: TRU)

TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world.
http://www.transunion.com/business

Contact	Dave Blumberg
	TransUnion
E-mail	david.blumberg@transunion.com
Telephone	312-972-6646

FAQ

What percentage of revenue did businesses lose to fraud according to TransUnion's report?

According to TransUnion's report, business leaders reported fraud losses equivalent to 6.5% of their companies' revenue.

How much did synthetic identity lending exposure increase in H1 2024 for TRU?

TransUnion (TRU) reported that synthetic identity lending exposure reached an all-time high of $3.2 billion in H1 2024, a 7% year-over-year increase from $3.0 billion in H1 2023.

Which industry was most impacted by synthetic identity fraud in H1 2024?

The auto loan industry was most impacted by synthetic identity fraud, accounting for $2.0 billion of the total exposure in H1 2024, according to TransUnion's report.

What was the global rate of suspected Digital Fraud in H1 2024 reported by TRU?

TransUnion (TRU) reported that the global rate of suspected Digital Fraud remained high at 5.2% of all transactions in H1 2024.