Hacienda-based Javelin Strategy & Research helps its clients make informed decisions in a digital financial world. It provides strategic insights for financial institutions, government, payments companies, merchants, fintechs, and technology providers. Javelin’s independent insights result from a rigorous research process that assesses consumers, businesses, providers, and the transactions ecosystem. It conducts in-depth primary research studies to pinpoint dynamic risks and opportunities in digital banking, payments, fraud and security, and lending.

Earlier this year, the firm released its 2020 Identity Fraud Report, which reveals financial institutions’ methods to identify and respond to fraud are no match for criminals’ high-tech schemes to hijack consumer accounts. Fraud losses grew 15% in 2019 to $16.9 billion even as instances of fraud fell from 14.4 million in 2018 to 13 million in 2019. Consumers faced $3.5 billion in out-of-pocket costs last year as criminals shifted their focus from card fraud to opening and taking over accounts.

“These findings should be a wake-up call for financial institutions, the payments industry, businesses and consumers across America,” according to Krista Tedder, Head of Fraud with Javelin Strategy & Research. “The data is proof of what we’ve long known. The full weight of identity fraud lies not only in counterfeit credit cards and magnetic stripes but in full account takeover and new account fraud. Now it is time to elevate our understanding of what security, detection, and resolution really mean.”

The study found account takeovers, identity theft where a criminal gains unauthorized access to an online account belonging to somebody else, are trending at the highest loss rate, up a staggering 72% over the prior year. This is due in large part to technological advancements that have made it easier for criminals to manipulate and socially engineer information, while making it harder to detect account takeovers without additional security infrastructure. And criminals work quickly; 40% of all fraudulent activity associated with an account takeover occurs within a day.

The study also found that peer-to-peer payments (P2P) fraud is skyrocketing. Financial institutions have found that P2P systems, which allow one person to send payments to another person, have seen a 733% increase in fraud between 2016 and 2019.

Pushing consumers from static passwords to safer authentication methods ranks among the study’s expert recommendations for financial service providers, merchants and other technology companies. The data suggest that consumers are open to making this change but lack the motivation.

The latest findings point to the need for a marked shift in how financial service providers, merchants, and technology companies fight the ever-evolving battle against fraud. Because criminals are adapting to new technologies faster than consumers will adopt technology to reduce their risk, the financial services industry bears the burden of driving the changes, such as increasing usage of two-factor and biometric authentication and promoting tokenized digital wallets in order to reduce the crippling impact of fraud on the American public.

The annual Identity Fraud Report is a comprehensive analysis of identity fraud trends, independently produced by Javelin Strategy & Research. The study is in its 17th  consecutive year. It is the nation’s longest-running study of identity fraud, with 85,000 consumers surveyed since 2003.

For more information about Javelin Strategy & Research, please visit www.javelinstrategy.com.

To learn more about the 2020 Identity Fraud Report, please visit www.javelinstrategy.com/coverage-area/2020-identity-fraud-study-genesis-identity-fraud-crisis.