TransUnion Analysis Finds Synthetic Identity Fraud Growing to Record Levels
U.S. lender exposure to synthetic identities is nearly $3 billion; Auto loans reach $1.8 billion representing more than 60% of total exposure to synthetic identities
As origination volumes for some credit products slow, a new TransUnion (NYSE: TRU) analysis finds fraud risk is continuing its upward trajectory as fraudsters employ increasingly sophisticated tactics to target lenders. TransUnion found that synthetic identity fraud continues to be among the most prevalent, especially in the auto finance industry, with both incidences and lender exposure associated with such fraud reaching all-time highs.
Synthetic fraud is the use of personally identifiable information (PII) to fabricate a person or entity in order to commit a dishonest act for personal or financial gain. Based on proprietary insights from TransUnion’s global intelligence network, the analysis demonstrates that while lender exposure to synthetic identity fraud remained relatively flat or even declined among some industries, the auto finance industry was a clear exception.
In the first half of 2023, U.S. auto lenders saw an increase in total synthetic identity exposure, reaching $1.8 billion.1 This represents a 38% rise year-over-year (YoY) and marks the second consecutive year of increased exposure in the auto finance industry. These findings are based on the total credit amount a synthetic identity has access to for U.S. auto loans, bank credit cards, retail credit cards and unsecured personal loans.
Trade incidences and lender exposure associated with synthetic identities are both at all-time highs, and auto finance is the driving force of that growth. Exposures associated with synthetic identities are significantly higher for the auto finance industry than those we see for any other industry, and that margin is likely to grow as fraudsters continue to gravitate toward the industry that they perceive as the most profitable to them. Fraudsters secure their auto loans with a synthetic identity, and drive away with expensive, new vehicles, never to be seen again.
U.S. Lender Exposure Associated with Synthetic Identities is Significantly Larger for Auto Finance Compared to Other Industries
|Bank credit cards|
|Retail credit cards|
|Unsecured personal loans|
Source: TransUnion TruValidate data
Retail and Video Gaming Among Most Targeted Digital Industries Globally; Gaming and Retail Digital Fraud Most Prevalent for Transactions Coming from the U.S.
In the first half of 2023, the retail and video gaming industries saw the highest rates of suspected digital fraud globally at 10.6% and 7.0%, respectively, followed by telecommunications at 5.3%. Globally, insurance and logistics were the industries with the lowest suspected digital fraud attempt rate in H1 2023. Among all industries, the suspected digital fraud rate stood at 5.3%, up from 4.5% one year ago.1
“When attempting to gauge the impact of digital fraud for any industry, fraud rates alone are an insufficient measure,” said Naureen Ali, vice president of product management at TransUnion. “It’s important to look at the industry’s overall size based on the total number of transactions, along with how much that industry is growing. This helps one develop a more holistic perspective on the impact of fraud on these industries, along with an idea of where the fraudsters may be focusing in the future.”
When looking at industries from a global digital transaction growth perspective, the gaming industry (online sports betting, poker, etc.) stands out, showing a YoY increase in total transactions of 85.3%.1
When the consumer is located in the U.S. during the transaction, gaming had the highest suspected digital fraud attempt rate in H1 2023 at 10.2%. However, the number of digital transactions coming from the U.S. in that industry dropped when comparing H1 2022 to H1 2023 (down 18.5% YoY), potentially blunting the impact to an extent. And while insurance saw a 61.2% increase in U.S. digital transactions YoY, the suspected digital fraud rate remained relatively low at less than one percent. 1
Gaming Saw the Greatest YoY Growth in Global Digital Transactions while Retail had the Highest Suspected Digital Fraud Rate
|Industry||Global suspected digital fraud attempt rate H1 2023||Change in number of global transactions H1 2022 to H1 2023||Suspected digital fraud attempt rate coming from US H1 2023||Change in number of digital transactions coming from US H1 2022 to H1 2023|
|Travel & leisure|
|Communities (online dating, forums, etc.)|
|Gaming (online sports betting, poker, etc.)|
Source: TransUnion TruValidate data
Data Breaches Fuel Identity Engineering and Record Balances Attributed to Synthetic Identities
The analysis also examined the volume and severity of data breaches for the first half of 2023 and compared them to previous years, using publicly available data analyzed by TransUnion’s TruEmpower™.
Results showed that primary breaches increased 5% over the first half of 2023 as opposed to the same period in 2022. This stands in comparison to third-party breaches, in which a business network is attacked via third-party vendors or suppliers, which declined YoY in H1 2023.2
While a person’s name continues to be the most exposed individual credential, a Social Security Number has passed date of birth as the second most often exposed individual credential in breaches in the first half of 2023. Social Security Numbers were exposed in 69% of breaches, up from 60% last year. Driver’s licenses or other state identification information were exposed in 31% in the first half of 2023, more than double last year’s 14% mark. Checking or savings account numbers also saw their exposure double year-over-year.2
TransUnion came to its conclusions primarily based on intelligence from its identity and fraud product suite, TransUnion TruValidate, which helps secure trust across channels and delivers efficient consumer experiences. The rate or percentage of suspected digital fraud attempts reflect interactions in which TransUnion customers were either denied in real time due to fraudulent indicators or were determined to be fraudulent after a manual review process—as compared to all transactions it assessed for fraud.
Download the Omnichannel Fraud in H1 2023 Infographic for more findings including, from calls into call centers, the US area codes that had the highest risk of fraud, and a global consumer survey that determined the percentage of consumers who said they were recently targeted by fraud. Specific country and regional data in the analysis include the United States, Brazil, Canada, Chile, Colombia, Dominican Republic, Hong Kong, India, Kenya, Mexico, Namibia, Philippines, Puerto Rico, Rwanda, South Africa, Spain, United Kingdom and Zambia.
Consumers who believe they may be a victim of fraud can find resources and information here.
1 TransUnion TruValidate data
2 TransUnion TruEmpower data
About TransUnion (NYSE:TRU)
TransUnion is a global information and insights company with over 12,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good®—and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world. http://www.transunion.com/business