WASHINGTON - As the coronavirus pandemic has accelerated the financial service industry's move to digital, a new report by TransUnion found that online fraudulent activity has increased by 11 percent since early March.
“The COVID-19 pandemic has created unique and unprecedented challenges for the financial services industry, and has presented many institutions with an increased fraud risk,” Jason Laky, executive vice president of financial services at TransUnion, said in a statement. “As financial institutions increase their digital presence to support consumers, it is imperative they have the right solutions in place to seamlessly establish trust with customers while delivering relevant, friction-right experiences.”
The report found the uptick in fraudulent activity may be linked to the increase in "card not present" activity amid a 250 percent surge in digital transactions since the pandemic began.
Identity fraud was ranked the most prevalent activity found among financial service customers with a reported 23 percent increase within TransUnion's network.
The most common form found was synthetic identity fraud, where fraudsters create fictitious identities by piecing together real identity attributes and fake information with the intent to open fraudulent accounts. It also can involve using stolen consumer identities through the use of phishing.
“One of the most effective ways to reduce this type of fraud is to detect suspicious patterns or attributes during the account opening and verification process,” said Shai Cohen, senior vice president of global fraud and identity solutions at TransUnion. “Lenders can easily incorporate these red flags into their fraud detection models for more comprehensive coverage while better protecting consumers."
The news comes as banks and lenders have been forced to cope with remote work conditions due to limited or no access to branches during the pandemic.
According to Transunion, synthetic fraud remains a serious issue with an estimated $1 billion in outstanding balances tied to synthetic identities across the auto, card and personal loan markets.