The theme of the newly released Javelin 2023 Identity Fraud Study is the butterfly effect – the concept that every event is interconnected in some way and even one small event can lead to a chain reaction of more significant events. The selection of this theme in relation to financial fraud couldn’t have been a more perfect choice.  

The website you visited to read about a major news event was hijacked and downloaded financial malware to your computer. The puppy you always wanted and purchased online doesn’t really exist. The perfect partner you met on a dating site lures you into an investment scam. These are only a few examples of everyday events that lead to fraud and result in tens of millions of identity theft victims every year. 

Aside from these seemingly innocuous events, there are the multitude of data breaches that lead to personal and financial information being offered for sale on the dark web to be used over and over again for fraudulent purposes. In its report, Javelin refers to this as “loss of control” when multiple accounts are impacted or taken over by a criminal. The numbers are quite astounding with 67% of identity theft victims reporting they have experienced a total loss of control. 

Identity theft is truly a butterfly effect.

Amidst the chaos fraud creates, as an industry, we tend to focus on the financial losses and emerging threats. After all, it is what captures attention and creates the salacious headlines. However, we overlook the humans who must deal with the ramifications of their identity being stolen and the emotional toll that comes along with it.  Embarrassment, shame, anger, stress, irritation – there’s a human side of fraud that is too often forgotten.

Removing the Taboo from Fraud

I applaud Javelin for looking beyond the financial impact of fraud in their annual study by letting the voices of real-life victims be heard and sharing how identity theft has impacted their lives. This is one of the main reasons that BioCatch decided to sponsor the study for a second year in a row. Identity theft is a devastating crime that doesn’t garner nearly enough attention from law enforcement, even when countries like the UK have reclassified it as a national security threat. 

This leads me to a question I have wondered about for a long time – how can we work together to remove the taboo from fraud? Especially here in the United States. Most banks are afraid to even discuss the issue in public unless forced to by lawmakers or in response to a national media report. Many consumers are afraid to report a scam out of shame or embarrassment. It’s the elephant in the room. Everyone knows it’s happening, but nobody wants to talk about it. Anything to do with fraud mostly generates bad publicity (that’s what generates clicks after all). Businesses don’t want to bring negative attention to themselves, and consumers don’t want to feel stupid.

This is why we need to change the narrative. Banks can and should make strides to bring attention to the positive actions they are taking to protect their customers. Some banks in the UK and Australia have mastered this already. Here are a few examples:

• In April 2022, TSB Bank released a report, Tackling Fraud Together, which offers a detailed analysis of fraud and scams impacting the bank. The report is a result of its Fraud Refund Guarantee program, announced in 2019, which has refunded 98% of all claims since its launch and was used as a marketing differentiator to help them acquire new customers.
• In October 2022, Lloyds Bank released a press statement on money mules and highlighted the proactive steps they are taking to address the issue including how they uncovered more than 130,000 mule accounts and prevented £91.7 million from being laundered by criminals.
• National Australia Bank regularly (and publicly) discusses their extensive investment in people, technology, and other capabilities to fight fraud and scams targeting their customers.

Customer Attrition is Costly

According to Javelin, the consequences of identity fraud losses, when combined with a poor experience, caused 41% of victims surveyed to close their accounts. This is a high number and one that should be considered carefully as customer attrition is costly. The growth in competition across the financial services industry in conjunction with the recent volatility of the market makes every customer more important than ever.

In general, consumer approval of their primary financial institution was relatively positive with 60% of respondents stating that they think their bank is doing a good job of protecting them from identity fraud. However, that number suggests there is still plenty of room for improvement and opportunities for banks to build and advance customer trust. Changing the narrative on identity fraud is a start.

Additional Resources

Access a copy of the Javelin 2023 Identity Fraud Study to see the full results of the 20th annual report.

Here are some other recommended resources related to the topic: 

• Use Your Brain When You Create Scam Warnings For Customers
• Impersonation Scams Increase 30% in 2022, Latin America Sees the Most Impact
• 8 Questions the Industry is Asking About Scam Reimbursement