TransUnion Report Indicates Suspected Digital Fraud in Nearly 14% of All Newly Created Global Digital Accounts in 2023

Rhea-AI Summary

TransUnion's 2024 State of Omnichannel Fraud Report reveals a surge in suspected synthetic identities impacting lenders with $3.1 billion exposure, driven by digital fraud tactics. The study highlights a paradigm shift among fraudsters towards creating new accounts using synthetic identities, leading to a 63% increase in lender exposure since 2020. Synthetic identity fraud emerged as the fastest-growing digital fraud type globally, with a 14.2% YoY increase. Retail and gaming industries faced the highest rates of suspected digital fraud in 2023, with global transactions showing a 5% suspected digital fraud rate.

Insights

Financial Analyst

The report from TransUnion highlights a significant increase in synthetic identity fraud, with lender exposure reaching $3.1 billion. This trend suggests a growing vulnerability within the financial sector to sophisticated fraud techniques. The rise in data breaches, up 157% since 2020, correlates with the increase in fraud, indicating a direct impact on the risk management and credit assessment processes of lenders.

From a financial perspective, the surge in fraudulent activities could lead to tighter credit conditions as lenders attempt to mitigate risks. This, in turn, might affect the availability of credit to legitimate borrowers and potentially increase the cost of borrowing due to heightened risk premiums. Investors should monitor the responses of financial institutions to these findings, as they might include increased investments in fraud detection systems, which could affect operational costs and profit margins.

Cybersecurity Expert

The data underscores the importance of cybersecurity measures in protecting against identity theft and fraud. The sophistication of attacks and the use of synthetic identities demonstrate that traditional security measures may be insufficient. The financial industry's reliance on digital transactions has created a larger attack surface for cybercriminals.

For businesses, this means investing in advanced fraud detection and prevention technologies is becoming increasingly imperative. Such investments are not only a defensive measure but also a competitive necessity to maintain consumer trust. Companies that fail to adequately protect against such threats may face not only financial losses but also reputational damage.

Risk Management Consultant

The report's findings have significant implications for risk management strategies within the lending industry. The sharp increase in suspected fraudulent accounts suggests existing risk models may need recalibration. Lenders must now consider integrating more robust identity verification processes and predictive analytics to identify and prevent synthetic identity fraud.

Long-term, the industry may see a shift towards more comprehensive and dynamic risk assessment models that account for the evolving nature of digital fraud. This shift could lead to increased collaboration with data analytics and cybersecurity firms to enhance predictive capabilities and real-time fraud detection.

Lenders face $3.1 billion in exposure to suspected synthetic identities for U.S. auto loans, bank credit cards, retail credit cards and unsecured personal loans, the highest level ever

CHICAGO, March 21, 2024 (GLOBE NEWSWIRE) -- Largely driven by bad actors using fabricated or stolen identities, the newly released TransUnion (NYSE: TRU) 2024 State of Omnichannel Fraud Report, based on proprietary insights from TransUnion’s global intelligence network, found that nearly one in seven newly created accounts is suspected to be Digital Fraud. This may represent a shift in tactics by fraudsters hoping to engage earlier in the transactional process.

The study showed that 13.5% of transactions associated with online account creation were suspected to be digital fraud globally in 2023. Examples of the types of transactions that take place during the account creation process include account signup, registration and loan origination. Among the industries that saw the highest percentage of digital account creation transactions suspected to be digital fraud globally in 2023 were retail (44.7%), travel and leisure (36.0%) and video gaming (31.5%).

Similarly, in the U.S., the highest percentage of digital fraud in the online customer journey occurred at account creation, at 4.8%, varying widely by industry.

“This early phase new account digital fraud may represent a paradigm shift of sorts among fraudsters,” said Steve Yin, senior vice president and global head of fraud solutions at TransUnion. “In lieu of using traditional tactics to gain access to and ultimately compromise existing accounts, they are increasingly choosing to create new accounts that they can control themselves. These fraudsters leverage synthetic identities assembled in large part through the use of credentials gathered as a result of one or multiple data breaches.”

The study also examined the volume and severity of data breaches over the course of 2023 and compared them to previous years. TransUnion determined that the number of data breaches in the U.S. increased by 157% from 2020 to 2023 and 15% year-over-year (YoY) in 2023 to a level never seen before. In addition, the average breach risk severity (the ability of a breach to enable identity fraud), as measured by TransUnion increased 11% YoY to 4.1 in 2023, the highest ever measured. This rise may have played a key role in this explosion in suspected fraudulent accounts and the record-high lender exposure associated with synthetic identities in 2023.

In addition, the study found lender exposure to these suspected synthetic identities for U.S. auto loans, bank credit cards, retail credit cards, and unsecured personal loans had soared by 63%, from $1.9 billion since the end of 2020 to $3.1 billion as of the end of 2023. This aligned with TransUnion’s digital fraud findings, which determined synthetic identity fraud was the fastest-growing type of digital fraud globally from 2022 to 2023. Lender exposure is defined as the total credit amount synthetic identities have access to for U.S. auto loans, bank credit cards, retail credit cards and unsecured personal loans.

Synthetic Identity Fraud Increased Significantly YoY
Top fraud types and their growth globally

Fraud type	Percent of digital fraud in 2022		Percent of digital fraud in 2023		YoY rate increase
Synthetic identity	5.3%		6.1%		14.2%
True identity theft	6.2%		6.9%		11.2%
Account takeover	6.3%		7.0%		11.1%
Credit card	6.4%		6.9%		7.7%
ACH/debit	5.9%		6.4%		7.3%

      Source: TransUnion TruValidate™

Overall, the study found that 5% of all global digital transactions were suspected to be digital fraud in 2023, with the volume of risky transactions up 14% YoY and 105% from 2019 to 2023. This growth continues to outpace the growth in overall digital transactions, which rose 90% from 2019 to 2023.

Retail and Video Gaming Among Top Industries Targeted by Suspected Digital Fraud Globally

Globally, retail surpassed gaming (online gambling, poker, etc.) as the industry saw the highest rate of suspected digital fraud in 2023 at 8.7%, up 21% YoY. In addition, the telecommunications industry saw a 111% YoY increase in suspected digital fraud rate, up to 4.5%.

“In recent years, the global retail industry has consistently been among those with the highest suspected fraud attempt rates. However, in 2023, we saw it climbed to the top of the list,” said Cecilia Seiden, vice president of TransUnion’s retail business. “As a result of credentials stolen in data breaches, often in industries other than retail, it has become increasingly easy for fraudsters to perpetrate attacks that leave retailers vulnerable to account takeover.”

For transactions where the consumer or fraudster was located in the U.S., however, gaming continues to see the highest digital fraud rate, up to 10.9% in 2023 from 10.0% in 2022. This is followed by retail, which sits at 6.1% for 2023, with its suspected digital fraud rate down 7% YoY. For transactions where the consumer was in the U.S., as is the case globally, the telecommunications industry saw the greatest increase in the suspected digital fraud rate, up 54% YoY. This is followed closely by communities like online forums and dating sites where the suspected digital fraud rate is up 52% YoY in the U.S.

Retail Saw the Highest Suspected Digital Fraud Rate in 2023 Globally, While Gaming Continues to See the Highest Rate in the U.S.

Industry	Global suspected digital fraud attempt rate 2023	Global suspected digital fraud attempt rate % change YoY	U.S. suspected digital fraud attempt rate 2023	U.S. suspected digital fraud attempt rate % change YoY
Retail	8.7%	21%	6.1%	-7%
Video gaming	7.6%	41%	5.5%	41%
Gaming (online sports betting, poker, etc.)	5.3%	-30%	10.9%	9%
Communities (online dating, forums, etc.)	4.6%	17%	5.0%	52%
Telecommunications	4.5%	111%	2.6%	54%
Financial services	4.3%	3%	4.4%	<1%
Travel & leisure	2.3%	8%	1.6%	9%
Insurance	1.5%	-8%	0.9%	-56%
Public sector	1.4%	-18%	0.5%	-23%
Logistics	0.9%	-30%	1.0%	-29%

Source: TransUnion TruValidate

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. TransUnion came to its conclusions about data breaches based on insights from TransUnion TruEmpower™. The TruEmpower Breach Risk Score uses a 1–10 scale where 1 represents least severe and 10 represents most severe.

Download the TransUnion 2024 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.

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 is the exposure of lenders to suspected synthetic identities according to TransUnion's report?

Lenders face a $3.1 billion exposure to suspected synthetic identities for U.S. auto loans, bank credit cards, retail credit cards, and unsecured personal loans.

What percentage of newly created accounts is suspected to be Digital Fraud according to the report?

Nearly one in seven newly created accounts is suspected to be Digital Fraud, with 13.5% of online account creation transactions globally in 2023.

Which industry saw the highest percentage of digital account creation transactions suspected to be digital fraud in 2023?

Retail industry saw the highest percentage of digital account creation transactions suspected to be digital fraud globally in 2023 at 44.7%.

What was the YoY increase in the number of data breaches in the U.S. according to TransUnion's findings?

The number of data breaches in the U.S. increased by 157% from 2020 to 2023 and 15% YoY in 2023.

Which type of fraud showed the highest YoY rate increase globally from 2022 to 2023?

Synthetic identity fraud showed the highest YoY rate increase globally from 2022 to 2023 at 14.2%.