Last week we discussed a recent Equifax report revealing that a startling 36 billion records were breached in 2020. This week we'd like to highlight a Transunion report highlighting a substantial increase in global digital fraud attempts in the first four months of 2021.

Key Trends

The report compared suspected digital fraud attempts in last four months of 2020 (Sept. 1–Dec. 31) and the first four months of 2021 (Jan. 1–May 1) to reveal the following:

• Digital fraud attempts in financial services increased by 149% globally
  
  
• Across countries, digital fraud attempts varied significantly (e.g., 791% increase in the UK, 108% increase in the US, and 612% increase in Brazil)
  
  
• Digital fraud attempts in insurance declined by 16%

True Identity Fraud vs. Synthetic Fraud

In the context of financial services, true identity fraud (taking over a real person's identity) was more prevalent than synthetic fraud (creating a fake identity using parts of a real person's identity). Several studies have indicated that the use of synthetic accounts declined during the pandemic as governments primed their economies with billions in stimulus. As government funding tapers off, use of synthetic fraud accounts is predicted to increase in the latter months of 2021.

Our Take

The Transunion report is inline with our experience across customers in the banking, buy now pay later, and small business lending segments. These institutions faced substantial pressures to digitize their application processes overnight, and fraudsters took notice of this opportunity. However, as the Equifax reported indicated, FIs are currently showing a strong willingness to investment in fraud operations infrastructure across both data and risk controls. We are optimistic that these investments, combined with high quality external data from upstream vendors will help mitigate the upcoming rise in synthetic fraud.

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