It's a bit of news some might describe as too good to be true. A Javelin Strategy & Research survey of consumers found that the number of identity fraud victims fell 28% last year from about 11 million to eight million and total annual fraud decreased 34% from $56 billion to $37 billion.
James Van Dyke, president and founder of Javelin, says: "Identity fraud underwent a marked decline and shift over the past year. This great news is a testament to the significant efforts businesses, the financial services industry and government agencies are making to educate consumers, protect data, and prevent and resolve identity fraud."
But reasons for the decline may have less to do with prevention efforts, surveillance, and notifications to consumers of potential fraudulent activity and more with the struggling economy and the laws of supply and demand. Marc DeCastro, research manager at IDC Financial Insights, says that "if economic activity is down and we're in a tightening credit environment, it makes sense fraud is down." In other words, lower volume, lower fraud.
Another factor, he said, is that pilfered ID data is so readily available it's becoming devalued. "Hackers can't get the right price, so they're increasingly going for higher-margin information, such as intellectual property." Any technology that makes it just a little more expensive for hackers to operate-such as technologies that secure the browser from vendors like Trusteer, 41st Parameter and Accertify-can help reduce their economic incentive.
Other analysts following the industry questioned whether fraud has really fallen. "Banks are experiencing more fraud and are spending more on it," says Avivah Litan, a vp at Gartner, who recently completed her own report. For instance, she found that ATM losses per card rose 13 percent in 2010 and signature debit card losses jumped 36%. In response, she expects to see stepped-up debit card fraud prevention tools from the likes of Actimize and FICO (with its Falcon 6 solution) in 2011.
The Javelin Report was not all good news for consumers. While overall identify fraud incidents decreased, the mean consumer out-of-pocket cost due to identity fraud increased 63% from $387 in 2009 to $631 per incident in 2010. (Consumer fraud costs include costs incurred by the victim towards payoff of any fraudulent debt as well as fees-legal or otherwise-to resolve fraudulent claims.) New account fraud, in which an account is opened without the victim's knowledge, was the most damaging sort of fraud in 2011, amounting to $17 billion.
