Navigating the Surge in Digital Fraud: Insights from TransUnion’s 2024 Report
In an era where digital transactions are becoming the norm, the specter of digital fraud looms larger than ever.
The TransUnion 2024 State of Omnichannel Fraud Report unveils concerning trends, with nearly one in seven newly created accounts suspected of being tainted by digital fraud. This alarming statistic underscores a possible strategic pivot among fraudsters, who are increasingly infiltrating systems at the account creation stage, thereby bypassing traditional security measures aimed at protecting existing accounts.
Account Creation: A Fraudster’s New Playground
The report, deriving insights from TransUnion’s extensive global intelligence network, highlights that 13.5% of online account creation transactions were under suspicion for digital fraud globally in 2023.
These transactions, spanning across account signup, registration, and loan origination processes, saw the highest fraud rates in the retail (44.7%), travel and leisure (36.0%), and video gaming (31.5%) sectors. This trend is not just a global phenomenon; in the U.S., account creation stages saw a 4.8% fraud rate, with significant industry variations.
Steve Yin, Senior Vice President and Global Head of Fraud Solutions at TransUnion, points to a potential paradigm shift in fraud tactics. “Instead of compromising existing accounts, fraudsters are increasingly creating new, controllable accounts using synthetic identities,” he explains.
These synthetic identities are often concocted from personal data harvested from data breaches, illustrating a direct link between the rising incidence of data breaches and the surge in account-related fraud.
The Data Breach Connection
The study also sheds light on the escalating severity and volume of data breaches. From 2020 to 2023, the U.S. saw a staggering 157% increase in data breaches, with a year-over-year increase of 15% in 2023 alone. This upward trend in breaches has contributed to the highest-ever breach risk severity score of 4.1 in 2023, indicating a greater likelihood of breaches enabling identity fraud.
Financial institutions are feeling the brunt of this fraud explosion, with lender exposure to suspected synthetic identities in the U.S. jumping 63% to $3.1 billion by the end of 2023. This is particularly concerning in sectors like auto loans, bank and retail credit cards, and unsecured personal loans. Synthetic identity fraud, the fastest-growing digital fraud type, represents a significant portion of this exposure.
Industries at the Frontlines
Globally, the retail industry has emerged as the most targeted sector, with an 8.7% suspected digital fraud rate in 2023, marking a 21% year-over-year increase. The telecommunications sector is not far behind, experiencing a 111% surge in fraud attempts. Cecilia Seiden, Vice President of TransUnion’s retail business, highlights the vulnerability of retailers to attacks leveraging stolen credentials, often originating from breaches in other industries.
In the U.S., the gaming sector remains a hotbed for digital fraud, with a rate of 10.9% in 2023. However, the retail sector and telecommunications industry are also witnessing significant increases in fraud rates. Online communities, including forums and dating sites, are experiencing a rapid rise in fraudulent activities, with a 52% year-over-year increase in the U.S.
TransUnion’s insights are drawn from its TruValidate suite, which assesses transactions for fraudulent indicators, policy violations, and subsequent customer investigations. The company’s approach to evaluating data breaches through its TruEmpower Breach Risk Score further underscores the severity of the situation.
Our Comment on the Article
The findings from TransUnion’s 2024 State of Omnichannel Fraud Report paint a grim picture of the digital landscape, where fraudsters are constantly evolving their tactics to exploit vulnerabilities in the digital account creation process.
This trend not only poses a direct threat to consumers and businesses but also highlights the interconnected nature of digital fraud, data breaches, and the financial sector’s exposure to synthetic identities. As we navigate this challenging environment, it becomes imperative for all stakeholders to bolster their defenses, adapt to the evolving tactics of fraudsters, and work collaboratively to safeguard the integrity of digital transactions.
The surge in digital fraud is a wake-up call, emphasizing the need for enhanced vigilance, innovative security measures, and a proactive approach to identifying and mitigating potential threats.
