CHICAGO— Nearly one in seven newly created accounts is suspected to be fraudulent, meaning lenders face $3.1 billion in exposure to synthetic identity fraud, according to a new analysis from TransUnion.
The findings are included in the company’s new 2024 State of Omnichannel Fraud Report, which is based on insights from TransUnion’s global intelligence network.
The finding that nearly one in seven newly created accounts is suspected to be fraudulent “may represent a shift in tactics by fraudsters hoping to engage earlier in the transactional process,” according to TransUnion.
TransUnion reported the study showed that 13.5% of transactions associated with online account creation were suspected to be fraudulent globally in 2023.
Examples Cited
“Examples of the types of transactions that take place during the account creation process include account signup, registration and loan origination,” the company said.
Among the industries that saw the highest percentage of digital account creation transactions suspected to be fraudulent globally in 2023 were retail (44.7%), travel and leisure (36.0%), and video gaming (31.5%).
Similarly, in the U.S., the highest percentage of fraud in the online customer journey occurred at account creation, at 4.8%, varying widely by industry, the analysis adds.
Potential Paradigm Shift
“This early phase new account fraud may represent a paradigm shift of sorts among fraudsters,” said Steve Yin, senior vice president and global head of fraud solutions at TransUnion. “In lieu of using traditional tactics to gain access to and ultimately compromise existing accounts, they are increasingly choosing to create new accounts that they can control themselves. These fraudsters leverage synthetic identities assembled in large part through the use of credentials gathered as a result of one or multiple data breaches.”
TransUnion said the study also examined the volume and severity of data breaches over the course of 2023 and compared them to previous years, with the company reporting it determined that the number of data breaches in the U.S. increased by 157% from 2020 to 2023 and 15% year-over-year (YoY) in 2023 to a “level never seen before.”
“In addition, the average breach risk severity (the ability of a breach to enable identity fraud), as measured by TransUnion increased 11% YoY to 4.1 in 2023, the highest ever measured,” TransUnion said. “This rise may have played a key role in this explosion in suspected fraudulent accounts and the record-high lender exposure associated with synthetic identities in 2023.”
Additional Findings
The study further found lender exposure to these suspected synthetic identities for U.S. auto loans, bank credit cards, retail credit cards, and unsecured personal loans had soared by 63%, from $1.9 billion since the end of 2020 to $3.1 billion as of the end of 2023.
“This aligned with TransUnion’s digital fraud findings, which determined synthetic identity fraud was the fastest-growing type of digital fraud globally from 2022 to 2023,” TransUnion said. “Lender exposure is defined as the total credit amount synthetic identities have access to for US auto loans, bank credit cards, retail credit cards and unsecured personal loans.”
Overall, TransUnion said the study found 5% of all global digital transactions were suspected to be fraudulent in 2023, with the volume of risky transactions up 14% YoY and 105% from 2019 to 2023.
“This growth continues to outpace the growth in overall digital transactions, which rose 90% from 2019 to 2023,” it added.
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