More fraud detected than 12 months ago, especially identity frauds, as the rate of detected fraud has risen from 24 to 35 frauds per 10,000 applications*.
Mortgages saw the highest rate of detected fraudulent applications, more than any other financial product.
Nottingham 14 October, 2014: — Experian®, the global information services company, today reveals that more fraud is being detected and prevented than a year ago, especially third party fraud, as lenders become even more effective in tackling the menace of identity theft.
The latest fraud data shows a significant rise in the detection of identity theft as a proportion of all frauds. Third party fraud - whereby a victim’s identity has been stolen by a third party – now accounts for 47 per cent of all fraud cases detected and prevented during the last year* and has risen from 30 per cent of all detected frauds in 2013.
Third party fraud was found to be most prevalent in applications for cards, savings and loans products whereas first party fraud – fraud committed against a financial institution by one of its own customers, was found to be most prevalent across mortgage and automotive finance applications.
The latest fraud data shows that fraud prevention is more effective than ever. Over the last 12 months there has been a significant increase in detected fraud cases with 35 frauds detected per 10,000 applications in August 2014, compared with just 24 cases detected per 10,000 applications in August 2013. This rate peaked in March 2014, with 43 out of every 10,000 applications detected as fraudulent.
Nick Mothershaw, UK&I Director of Identity & Fraud at Experian, comments: “Our latest analysis shows the financial services industry is making continued and significant progress in the fight against fraud, and suggests financial services providers are investing in fraud detection and prevention measures in order to better protect customers from identity thieves. The significant increase in detected and prevented third party fraud in particular shows how far providers have come in becoming wiser to the tricks of identity thieves, although recent high profile instances of data theft show that there is still much to be done.”
Fraud by financial services products
Experian’s analysis reveals that the rate of detected fraud across financial services products has also increased year-on-year. In August 2013, an average of 24 out of every 10,000 applications were detected as fraudulent. In August 2014, an average of 35 out of every 10,000 applications were detected as fraudulent. The products that saw the highest level of detected fraudulent applications, as at August 2014, were mortgages, followed by current account products and then card products.
Overall, mortgage applications were the highest ranked product in terms of rate of detected fraud. In August 2013, 82 out of every 10,000 mortgage applications were found to be fraudulent, compared to 79 out of every 10,000 applications in August 2014 – highlighting that the number of detected fraudulent mortgage applications has remained fairly consistent as a targeted product.
Of those applications uncovered to be fraudulent in August 2014, 96 per cent were classed as first party fraud (i.e. applications made by the genuine customer) – making mortgages the sector where first party fraud is most prevalent.
Current account applications saw the largest rise in detected fraud year-on-year, as the number of cases uncovered as fraudulent increased by 60 per cent from August 2013 to August 2014. Currently, (as at August 2014), current account application fraud is the second highest ranked product for detected fraud among financial services products. In August 2014, 56 in every 10,000 current account applications were found to be fraudulent, compared to 35 in every 10,000 applications for August 2013.
Current accounts prove to be a target for identity thieves, with 42 per cent of applications uncovered to be third party fraud attempts, compared to 21 per cent detected as third party fraud the year before (August 2013).
Nick Mothershaw, UK&I Director of Identity & Fraud at Experian comments: “The level of detected current account application fraud may suggest that while the seven day switching process is more convenient for customers, it may also have opened up new weaknesses in the application process which can be exploited by fraudsters.”
Card application fraud was the third highest detected fraud as at August 2014, with 30 in every 10,000 applications found to be fraudulent. This compares to 16 in every 10,000 applications in August 2013 – showing a significant 47 per cent rise in detected card application fraud year-on-year.
Of those applications uncovered as fraudulent in August 2014, 79 per cent were uncovered as third party fraud attempts, making card application fraud the primary target for identity thieves.
In August 2014, 16 in every 10,000 applications were found to be fraudulent, compared to 7 in every 10,000 applications in August 2013, a notable rise of 129 per cent in detected fraud.
Loans proved to be a primary target for identity thieves, with 78 per cent of applications uncovered to be third party fraud attempts, compared to 61 per cent detected as third party fraud the year before (August 2013).
Year-on-year trends show that in August 2014, 25 in every 10,000 applications were found to be fraudulent, compared to 21 in every 10,000 applications for the same period the previous year – showing a slight rise in applications detected as fraudulent.
Of those applications uncovered as fraudulent in August 2014, 69 per cent were committed by third party fraudsters. This compares to 65 per cent in August 2013.
In August 2014, 27 in every 10,000 applications were found to be fraudulent, compared to 32 in every 10,000 applications for the previous year.
Of those applications uncovered as fraudulent in August 2014, 82 per cent were identified as first party fraud attempts, compared with 84 per cent in August 2013, making automotive finance another product popularly targeted by first party fraudsters.
Nick Mothershaw, UK&I Director of Identity & Fraud at Experian concludes:
“The level of detected fraud across financial products suggests that the threat of fraud remains as prevalent today as ever, if not more so. Investing in the latest fraud prevention systems remains of paramount importance for providers to protect against first party misrepresentation and the tactics of identity thieves. As people spread their financial products across a wider range of digital platforms, they must also remain vigilant to ensure their personal details remain out of the clutches of identity thieves.”
Notes to editors
*Based on August 2013 to August 2014 fraud data
Experian’s Fraud Index is based on data derived from National Hunter and Insurance Hunter, the UK’s leading fraud prevention systems, operated by Experian on behalf of members. These systems enable financial institutions to cross-match applications against over 100 million previous application records in order to spot commonalities and anomalies that are potentially indicative of fraud for further investigation.
Experian is the leading global information services company, providing data and analytical tools to clients around the world. The Group helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended 31 March 2014 was US$4.8 billion. Experian employs approximately 16,000 people in 39 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil.
For more information, visit http://www.experianplc.com.