Experian: US Suffers the Most Online Fraud

Consumers and businesses in the United States appear to be experiencing substantially more online fraud than their counterparts in other regions of the world.

The situation is driving an increased focus on technologies for detecting and preventing online fraud, a new survey by Experian shows.

The credit-monitoring firm recently polled 1,000 large companies and some 10,000 consumers across 21 countries on their experience with online fraud. The results showed eight-in-10 US businesses reporting an increase in fraud losses over the past 12 months, compared to 55% in Europe, the Middle East, and the rest of Asia. Much of the losses were tied to fraud resulting from account takeovers and the use of fake and stolen identities.

Experian's survey shows that some 40% of consumers worldwide have experienced at least one fraudulent incident online. Here again, the incidence of fraud was much higher among US consumers than individuals elsewhere.

The data is the latest to highlight surging losses to US businesses from account takeover attacks; from the use of stolen identity credentials to create fraudulent credit card accounts; and other types of fraud.

Seventy-four percent of US financial institutions recently surveyed by the Aite Group, for instance, reported an increase in losses via the digital channel over the past two years; 60% reported a 10% increase or higher. As with the Experian survey, the respondents in Aite's study also pointed to account takeovers as one of the primary causes for increased fraud losses.

Kathleen Peters, Experian's senior vice president and head of fraud and identity, says a big reason for the higher prevalence of online fraud in the US is sheer scale. "The US continues to be a target-rich environment, with all types of online transactions increasing," Peters says.

The massive volume of compromised identity records as well as the bustling Dark Web, have made it easier for criminals to conduct a wide range of fraudulent activity, she says.

The relatively recent adoption in the US of credit and debit cards based on the Europay MasterVard Visa (EMV) smartcard standard is another factor. The new payment cards have made it much harder for criminals to carry out fraud using counterfeit cards. As a result, a lot of the criminal activity that used to take place offline has migrated online in recent years, she says.

Synthetic ID Fraud

In addition, "one of the more significant trends we've seen over the past year has been the move to synthetic identity fraud – which is growing 35% year-over-year," Peters says. This is a type of fraud where criminals cobble together real and fake information — such as a false name and a real but stolen Social Security Number — to create a brand-new identity.

The increasing fraud trend is driving a greater interest in detection and mitigation technologies. Three quarters of the companies in Experian's survey said they had increased their online fraud management budgets last year, and they expect it will increase this year as well.

"Organizations need to move beyond basic demographic information and passwords to authenticate individuals," Peters says. "A multi-layered approach that leverages advanced data and technology, such as device intelligence, biometrics, and document verification," is critical to secure authentication while helping maintain a positive customer experience she says.

Such measures can help not just reduce fraud but boost consumer confidence as well, the Experian survey found. Nine in ten consumers surveyed are aware that businesses are collecting and using their personal information in different ways and 60% are aware of the risks of providing their personal information online. Still, 70% of consumers say they would be willing to share more personal information online if they were better assured of its security.

"Transaction security should no longer be viewed as binary, but on a scale," says David Vergara, director of security product marketing at OneSpan. Online fraud has increased in volume, velocity, and sophistication making it hard for businesses and consumers to distinguish legitimate from illegitimate activity. "Organizations need to implement more intelligent and layered security measures to more accurately detect fraud," Vergara says.

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