In the year since the pandemic began, fraudulent digital transaction attempts against businesses increased 46% worldwide – and 22% in the U.S. specifically – compared to the previous 12 months, according to TransUnion’s latest quarterly analysis of global online fraud trends.
And during the time periods studied by TransUnion (March 11, 2019 to March 10, 2020 versus March 11, 2020 to March 10, 2021), the financial services industry saw the second-highest increase in suspected digital fraud attempts out of nine industries analyzed – 57.49% – just behind the telecommunications industry, which saw a 57.52% increase. Identity theft was the top type of fraud attacking the financial services industry, the company said.
In addition, TransUnion found 36% of global consumers said they were recently targeted by COVID-related digital fraud as of March 16, 2021, up from 29% in April 2020. In the U.S., this increase was even greater – 26% in April 2020 versus 38% in March 2021. TransUnion also reported a 21% increase in COVID-related phishing attacks against consumers globally since November 2020.
While consumers experienced identity theft and phishing attacks pre-COVID, the pandemic has given fraudsters new opportunities to more easily steal personal information. Melissa Gaddis, senior director of customer success, Global Fraud Solutions at TransUnion, explained that when businesses pivoted to interacting with customers online at the onset of the pandemic, fraudsters began looking for security gaps at those new-to-online businesses. In addition, she said, the financial hardship caused by the pandemic led many consumers to rely on stimulus and unemployment payments to make ends meet, and they often expected to receive official communications about those payments. This opened doors for fraudsters to prey on desperate consumers by posing as the IRS or another government entity and asking for personal information with the false promise of delivering their much-needed payment.
“Fraudsters can always find identities to buy on the dark web, but they’re now gaining identities through phishing attacks because of COVID. Then, they’re turning around and using stolen credentials at financial institutions – opening credit cards, and going off and buying things,” Gaddis said. “Fraudsters are so good of taking advantage of what’s going on in the world.”
Continuing a trend the company reported in September 2020, TransUnion also found that Gen Zers (those born from 1995-2002) were targeted the most by digital fraud globally, with 42% of recent survey respondents who said they were targets of digital fraud being from the generation, followed by millennials at 37%. The youngest generation of consumers was also targeted the most in the U.S. (53%), followed by millennials (40%).
“[Gen Z] is the generation we wouldn’t expect to be targeted, but because of the high rates of unemployment and the need for stimulus payments, that generation will be a little more impacted than those who are retired, for example,” Gaddis said. “Fraudsters are targeting the people who they think are going to believe the story.”
One challenge of shifting almost exclusively to online transactions for credit unions has been the need to beef up security without causing too much friction for loyal members through identity verification requirements. To reduce friction, Gaddis recommended that credit unions only require members to complete the maximum number of verification steps during initial online banking logins and for higher-risk transactions.
TransUnion also revealed the top places for digital fraud in the past year. In the U.S., the cities with the highest percent of suspected fraudulent transactions were Tempe, Ariz., followed by Hamtramck, Mich., and Colonial, Pa. Worldwide, the top country was the Seychelles, followed by Kazakhstan and Turkmenistan.
The company’s findings on fraud against businesses were based on intelligence from billions of transactions and more than 40,000 websites and apps contained in its flagship identity proofing, risk-based authentication and fraud analytics solution suite, TransUnion TruValidate. Consumer fraud findings were drawn from TransUnion’s Global Consumer Pulse Study, an online survey of 2,995 adults conducted from Feb. 26 to March 1, 2021.