Identity theft: the cost of losing yourself

Gemma Staite at BioCatch examines identity theft’s effects and explains the need for more robust security

Identity theft is a complex issue that can affect anyone regardless of age, gender, or socioeconomic status.

In 2022, it was revealed that identity theft was costing the UK an astounding £4bn a year with 39% of UK businesses having fallen prey to cyber-attacks, ranging from phishing attempts and malware to ransomware attacks. This same study shows that 67% of victims experience a total loss of control over their bank accounts.

While the industry tends to focus on financial losses and emerging threats, the human side of fraud, including embarrassment, shame, and stress, is often overlooked.

Fraud’s ripple effect: understanding the Butterfly Effect

The Butterfly Effect concept, developed by Javelin Strategy & Research in their 2023 Identity Fraud Report, entails that every event is interconnected in some way and even one small event can lead to a chain reaction of more significant events.

In the context of financial fraud, it is plausible that small events such as website hijacking, online scams, or data breaches can lead to larger consequences, such as identity theft and financial loss for victims.

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 is a multitude of data breaches that lead to personal and financial information being offered for sale on the dark web to be used repeatedly for fraudulent purposes. This can be classed as a “loss of control” when multiple accounts are impacted or taken over by a criminal.

With 67% of identity theft victims reporting they have experienced a total loss of control, the numbers are quite shocking. 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.

Breaking the silence on fraud

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.

Removing the stigma associated with fraud in the UK is a complex subject that calls for collective cooperation. We must band together to spread knowledge about fraud, its effects, and how to spot it. This can be accomplished by creating public awareness campaigns, educational initiatives, and employee, corporate, and individual training sessions.

We can encourage people to come forward and report fraud by developing accessible and simple-to-use reporting methods. We can then work cooperatively with law enforcement organisations and financial institutions to stop similar occurrences from happening in the future.

Additionally, we must see to it that those who commit fraud receive the proper punishment and that whistleblowers who disclose questionable activities are supported and protected.

We can ultimately eliminate the stigma associated with fraud in the UK and build a more just and equal society by working together to develop a culture of transparency and openness.

Communicating security measures

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 have mastered this already.

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.

The high cost of losing customers

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.

60% of respondents said they believe their bank is safeguarding them well from identity fraud, indicating that overall, consumers have a favourable opinion of their major financial institution.

That amount, however, indicates that there is still a great deal of opportunity for development and chances for banks to increase and foster client trust. The first step is to alter the perception of identity fraud.

Gemma Staite is Director, Threat Analytics (EMEA), at BioCatch

Main image courtesy of iStockPhoto.com