Holiday Shopping 2020: A Flurry of Credit Card Openings Creates a Snowstorm of New Account Fraud

Nov. 16, 2020 | by Heidi Bleau

All forecasts predict that online shopping will be the defining trend of the 2020 holiday season. According to a study by Deloitte, e-commerce sales are expected to grow by 25% to 35% this year. In addition, with a resurgence of coronavirus cases expected in the cold months, many consumers are likely to shop from the comfort of their homes. This expected increase in digital commerce is a continued trend toward digital channel usage that we’ve been tracking since the pandemic began.

Amid all of this, an interesting shift in consumer behavior has appeared that will directly affect financial institutions and card issuers: an increase in the number of consumers who will open new credit accounts. According to a recent report, 44% of Americans plan to apply for a store credit card this holiday season, a jump of 20 percentage points from just two years ago.

With a flurry of new credit card applications, there’s a 100% chance in the forecast for account opening fraud. Here’s how lenders and issuers can weather the storm.

A Snowstorm of New Account Fraud

One major concern that has emerged during the pandemic is new account fraud. New account fraud occurs when cybercriminals use stolen credentials or synthetic identities to create a new account with the intent of committing fraud. In the past year, there has been a surge in lending fraud, card-not-present fraud, and mule account creation. Aite Group estimates that there will be $2.1 billion in total losses from credit card application fraud in the US in 2020 alone.

As we head into the holidays, fraudsters will follow the money to take advantage of special promos retailers may offer to incentivize consumers to apply for credit cards. The challenge will be separating out the cybercriminals capitalizing on the shift to digital applications from legitimate customers looking to get in on holiday promotions and discounts. Though this is a challenge every year, the extended shopping season and higher than average volumes of digital traffic gives cybercriminals a much larger window of opportunity to fly under the radar.

All I Want for Digital Account Opening Is…

… a way to offer a low friction customer experience while ensuring digital channels are protected. This goal has been steadily climbing to the top of the business agenda for every consumer lending institution. It’s not just enough to stop fraud though. Every digital interaction is an opportunity to build trust with customers.

How do you determine when new customers are not? Here’s a case study from a top-5 US card issuer that was experiencing millions of dollars in fraud losses caused by the use of stolen personal information or synthetic IDs in the credit application process. Their existing fraud detection model was based on traditional identify verification methods (i.e. personal data and device reputation). After deploying behavioral biometrics to their account opening process, the issuer gained a new layer of visibility that enabled them to quickly spot “bad” behaviors indicative of fraud while creating a smooth journey for legitimate customers.

If you’re looking for the best present to give customers this holiday season, it’s the confidence that they can transact online securely and with ease, whether opening a new credit card during the holiday shopping rush or at any time of the year.

Learn more about enterprise-grade account opening protection from BioCatch here.

Topics: New Account Fraud