How bad is consumer fraud? Let’s put it this way: it’s quickly moving from bad to worse. Very quickly.
Fraudulent transactions in the first half of 2024 were up over 73% year over year, and suspected fraudulent transactions increased by over 84%, according to the 2024 Mid-Year Identity Fraud Review, released today by AuthenticID, a global identity verification and fraud prevention company.
The tactics are vastly different than they were a year ago, too – mostly leveraged by the use of artificial intelligence (AI). Scammers are essentially sitting in our pockets lying in wait on our phones, using deepfake technology to call us, message us from social media, or text us to try and catch us off guard by posing as someone we know or trust. Case in point: the ever-evolving grandparent scam that’s using AI to its advantage.
Deepfakes have gotten so good that when AuthenticID researchers showed people a headshot of a real person and a deepfake one, 91% of them couldn’t tell them apart.
Generative AI isn’t just making an impact in deepfakes. A fake ID can now be made cheaply and at scale using artificial intelligence: worse, it is convincing enough to fool traditional identity verification methods.
“These IDs are not just used to get underage youths into a bar. They are also used in scams that can cost businesses millions. These fakes can even duplicate some often-used security features, including barcodes, holograms, and background patterns,” the researchers wrote.
Account takeovers are a growing threat
Once again, AI is fueling another fraud surge: account takeover (ATO) attacks. ATOs affected almost 30% of American consumers and caused $13 billion in financial losses in 2023.
Other researchers have found that 28.7% of all fraud in 2023 was third-party account takeover. That's when criminals gain unauthorized access to financial accounts like bank accounts, credit cards, or investment accounts, and drain funds, make fraudulent purchases, or go as far as taking out loans in the victim's name.
And we’re having to face a very harsh reality here, too: all a hacker has to do is cough up as little as $10 to buy someone’s credentials on the Dark Web. For example, if you wanted to buy a Chase bank log-in, you could get one for $500. Want to pretend you’re from New Hampshire? You can buy a New Hampshire drivers license template for $20.
“If you want a quick buck and have the money to purchase, you just go to the dark web where you can purchase … enough documentation to successfully steal a person’s identity!,” AuthenticID’s Justin Sorensen said, talking about a fraudster’s disregard for your identity. “While it’s more of an indirect way of using people, a fraudster is still using 'you' to commit fraud.”
Do you have an MDL?
The AuthenticID report also documents consumer and business sentiment regarding digital identity trends, such as biometric authentication and the growth of mobile driver’s licenses (mDLs), with a notable shift in consumer openness to the adoption of digital identity credentials, as well as biometric authentication to access accounts.
Mobile driver’s license? Yep, they’re a thing – and probably one we should all look into. An mDL is a digital version of a traditional physical driver's license. They are stored on a smartphone or other mobile device, typically within a dedicated app or digital wallet.
There are several upsides to mDLs. For example, they eliminate the need to carry a physical card, making it easier to present identification when needed; and can potentially be used for various purposes beyond just driving, such as age verification, travel, or accessing government services.
But the real beauty of mDLs is that they add another layer of protection against fraud. They use encryption and other security measures to ensure the information is protected and the license cannot be easily duplicated or tampered with. In other words, fewer opportunities for someone to pretend they’re you and better protection for yourself.
And they’re widely available, too. In fact, 46 of the 50 U.S. states either offer mDLs or are working on putting them in place.
