What is identity theft and what are its repercussions?

If you think you’re immune identity theft, let me set things straight.

There have been almost 17 million cases reported in 2017. And I’m not talking about the whole world. Only the US. Moreover, the alarming part is that the number of reported cases has been steadily on the rise since 2014.

Every year these fraudsters are scamming consumers of billions of dollars. But, it’s not just the consumers who are at risk. Rather, identity theft poses a far greater threat to businesses.

And so, we’ve decided to shed some light on identity theft.

How common is Identity Theft?

The number of individuals affected has only risen over the years. And as our world becomes more and more digitized, the threat will only get worse.

The 16.7 million cases reported in the USA in 2017, resulted in a total loss of $16.8 Billion dollars! Although the exact numbers haven’t come out for 2018, you can only expect it to be worse.

And that’s not all; in 2017, the Identity Theft Resource Center found an unprecedented 1579 data breaches which exposed more than 178 million records!

The alarming part wasn’t the number of potential victims, which was estimated to be around 148 million, but, the sensitive information that was exposed. The breached data included names, birth dates, addresses, social security numbers and it also contained driver’s license numbers in some instances.

Now, you might be wondering, what can a hacker do with all that data? Well, that’s the scary part.

What do fraudsters do with stolen identity details?

There are two main things that can happen. One, the hackers can directly use stolen data to commit various kinds of identity theft fraud. Or, they could simply sell the information to others.

How do fraudsters use stolen details?

The Federal Trade Commission, which is a government agency that maintains a database of identity theft complaints, divides identity theft into the following 6 categories:

1. Employment or Tax-Related Identity Theft

This is the most common form of Identity fraud. Almost 34% of Identity theft cases are reported to be employment or tax-related fraud.

In this case, the criminal uses a different person’s Social Security number and other personal information to file income tax returns or worse, get employed using the stolen details.

Well, how might that be beneficial for a fraudster?

Well, imagine this, a fraudster might have criminal records against his real identity, which can prove to be a problem when looking for a job. But, using a stolen identity with a clean record, he/she might be able to gain employment quite easily.

2. Credit Card Identity Theft

Now, most of you will already know about this type of fraud. Interestingly, it’s still second compared to employment or tax-related identity thefts. About 33% of the cases are reported to be  credit card fraud.

Here, the thief usually acquires credit card details through hacking sites where your information may be stored. Sometimes, it could also result from employees making a quick record of your card while you’re purchasing at a retail store.

3. Phone or Utilities Identity Theft

About 13% of the cases are reported to be as phone or utilities Identity fraud.

In this case, the thief uses a person’s stolen information to open a new mobile connection. And it’s not limited to just phones. The criminal could use the details to register a new electricity, or any other type of utility connection.

4. Bank Identity Theft

Bank identity theft is almost as common as the phone or utilities fraud. Almost 12% of the cases are reported under this category.

Here, a fraudster uses stolen details to take over an existing bank account or open a new one.

5. Loan or Lease Identity Theft

Although not as common as the previous types of identity thefts, loan or lease fraud still accounts for 7% of the cases.

Here, the criminal uses a person’s data to get access to a loan or lease. And needless to say, the loan will never be repaid.

6. Government Documents or Benefits Identity Theft

Finally, the last type of identity theft is Government Documents or Benefits fraud. Like the former type of fraud, almost 7% of the reported Identity theft cases fall under this category.

In this case, the fraudster uses stolen data to get government benefits.

How can Identity Theft impact business owners?

While identity theft can drastically affect many individuals, it is the business owners who are truly at risk. And if you’re running an online business, pay close attention to this section.

After fraudsters use stolen credit card details and financial accounts to make purchases, what do you think happens?

Since most consumers have zero liability payment cards, they aren’t the ones who truly get victimized for the crime. Rather, it is the merchants.

After the consumer reports an unauthorized transaction, it results in a chargeback; in other words, a forced credit card refund. And that transfers the transaction amount from the business account directly to the consumer.

These chargebacks can ultimately prove to be detrimental for a business. Moreover, if there are too many forced credit card refunds from a particular business, the merchant bank can take away the business’s credit card payment rights.

As a consumer, you need to always be alert on the internet. But, for a business, the stakes are far greater and so is the work needed to ensure proper security.

Final words

 

That about wraps it up. Remember, as a business you can’t be too safe when looking to protect yourself form fraud.  Identity fraud can not only significantly impact your finances but also your brand image and customer relationships.

Taking all the necessary precautions to protect your business is critical, and we’re here to help with that.