As consumers pivoted in droves to digital channels for purchases and financial services at the outset of the Covid-19 pandemic, criminals pounced on the trend to perpetrate more fraud and identity theft, according to data from credit-reporting agency TransUnion LLC.
Between March 11 and April 28, 2020, when the first wave of the pandemic hit the United States, more than 100 million suspected fraudulent transactions were identified by TransUnion, a 5% increase from the pre-pandemic period of January 1 to March 10, 2020, TransUnion says.
Telecommunications and financial services were among the hardest-hit categories, with telecommunications providers seeing a 76% increase in suspected credit card fraud and financial services seeing a suspected 11% increase in identity theft. E-commerce merchants were also heavily targeted, experiencing a 12% increase in suspected promotional abuse.
“The pandemic accelerated the digital transformation for a lot of businesses overnight during the first phase of the pandemic,” says Shai Cohen, senior vice president, global fraud solutions for TransUnion. “If telecommunications, financial services, and e-commerce companies did not go fully digital right away as the pandemic hit, it would have (negatively) impacted their businesses.”
Many companies that shifted more of their customer-facing operations online, however, did not have the tools and procedures in place to fully protect their digital channels from fraud, identity theft, and account takeover, Cohen adds.
As the economy began to gradually reopen last summer, criminals turned their attention to consumers. From April 29 through July 25, the number of consumers impacted by Covid-19-related digital fraud scams rose 10%, compared to the March 11 to April 28 period. Worldwide, 32% of consumers were targeted by digital fraud related to Covid-19. Consumers aged 18 to 25 were the largest demographic targeted, with 36% on the receiving end of fraud-related scams.
“Generation Z is a demographic that puts a lot of its credentials out in digital channels,” Cohen says.
Phishing was the top digital scam reported. In a survey of consumers from Oct. 28 to Nov. 5, 27% said they were targeted with pandemic-themed phishing scams. Phishing for personally identifiable information is a large contributor to identity fraud, TransUnion says.
Many of the scams aimed at consumers were intended to either steal an identity or gather information that criminals could use to create a synthetic identity, which is a false identity created using valid personal information from multiple consumers.
Ways to combat fraud as the pandemic continues to rage include increased use of artificial intelligence and machine-learning applications by merchants and financial service providers. These technologies can detect anomalies in consumer behavior. Increased use of biometrics to validate consumer identities is also expected.
“Merchants and financial-service providers need to get better at detecting and defeating fraud, as well as reducing false positives,” says Cohen.