U.S. Firms Can Save by Aiming Identity-Fraud-Mitigation At High-Risk Consumers

The 2006 Demographics of Identity Fraud Report, published by Javelin Strategy & Research, reveals corporations can save up to $4 billion by directing identity-fraud-mitigation efforts towards high-risk consumers. The report also reveals that young and low income consumers are most susceptible to identity fraud. “U.S. companies can potentially avoid billions in fraud losses by focusing on the unique, individual differences of how this crime is experienced by people of different ages, ethnicities and income,” said James Van Dyke, Founder and Principal Analyst for Javelin.

Rubina Johannes, Risk and Fraud Analyst and author of the report, added, “Some demographic groups are at significantly higher risk, such as Hispanics, African Americans and Gen X. Higher-income groups become victimized more often, but once the dust settles, poorer individuals register a higher loss.”

Key Findings Of The 2006 Demographics of Identity Fraud Report:

• The fraud cases of Hispanics and African Americans combined represent 35% ($20 billion) of total annual identity fraud losses. Hispanics or African Americans between the ages of 25-34 have a 56% higher chance of becoming victims of identity fraud compared to other consumers.

• While households earning less than $15,000 are victimized at almost half the rate of those earning over $150,000, average losses (at $7,328) incurred from the lowest income group are more than 67% higher than that of the highest income group. Households earning more than $150,000 are 50% more likely to be victimized compared to the average household, yet this demographic represents only 6% ($3.6 billion) of total annual losses.

• The lower the income, the more likely that personal information will be breached through access points primarily controlled by the consumer. When the means of fraud were known, 77% of households earning less than $35,000 reported the means-of-access to personal information resided primarily within their own control — compared to 57% of households earning more than $100,000.

• Households earning less than $50,000 are three times as likely to be victimized by “friendly fraud” (fraud committed by close associates of the victim, such as friends and neighbors) than those earning over $50,000.

• Members of Gen X are two times as likely to become victims of fraud compared to seniors.

The 2006 Demographics of Identity Fraud Report is a companion to the 2006 Identity Fraud Survey Report, published by Javelin in January 2006. The earlier report examines identity fraud and its characteristics relative to the demographics of its victims. This report also provides financial institutions with a finer understanding on how their identity-fraud prevention, detection and resolution processes can be modified to better serve their clients and to reduce operating losses.

“Considering the wide gateway for obtaining access to personal information that is under the control of the consumer, we see an opportunity for businesses to partner with their customers in preventing and detecting identity fraud,” said Van Dyke. “This can often be accomplished with strategies specific to consumer age, income and ethnicity. Consumer awareness, education and empowerment can increase public safety, effectively deterring fraud operators’ ability to successfully perpetrate identity fraud. It is the key to closing the gap in personal information protection.”

For a copy of the complete 2006 Demographics of Identity Fraud Report, or for information on the methodologies applied, key findings, and other Javelin reports, visit: www.javelinstrategy.com/research