Explainer: Identity Theft and How Does it Target the Banking Sector?
With a rise in internet penetration and the adoption of digital means, sophisticated forms of crimes have taken shape in the banking sector. Scammers and fraudsters leverage a plethora of schemes to conduct financial fraud. One of the most pervasive forms of fraud is ‘Identity fraud’, which equally affects customers and banks. A study estimates that 45% of adult internet users in India faced identity theft in one way or the other in 2020.
Identity theft does more than compromise customers’ bank accounts. It costs them untold hours that force the customers to change their account passwords meticulously and contact customer care to have the charges revoked. The sophistication of such fraud attempts has forced financial institutions to address identity theft as a top priority.
There are varied forms of identity theft and fraud in an online ecosystem that can wreak havoc on the financial status from both the bank and customer’s perspective. Let us understand them in detail and how it targets the banking sector.
Types of Identity Theft Fraud
Scammers often send emails and pop-ups that appear from legit banks and credit card companies. The content of the message contains a link that, when clicked, directs the user to a fictitious site created to convince the users to reveal their personal information and banking details. The links direct to an exact-look alike site of the official bank site.
2. Account Takeover Fraud
This type of fraud entails when someone else gains access and takes control of your accounts without your knowledge/permission. It can then be used for fraudulent transactions, gain access to other accounts and vital information, transfer money, undertake scrupulous exchanges. Research cites that account takeover fraud accounts for 53% of total frauds online.
3. Senior Identity Theft
One of the most prevalent forms of fraud, the scammers target the elderly citizens (most vulnerable to cybercriminals) and trick them into divulging crucial information. The scammers call to ask for passwords and personal details to access the accounts by posing as bank officers and trustworthy allies.
4. Biometric ID Theft
Another sophisticated form of fraud, Biometric ID theft, involves stealing or spoofing a user’s physical or behavioral traits to unlock a device- for instance, voice recognition or facial recognition to unlock the device or tap into other devices. This form of theft is a goldmine for hackers, for they get access to digital wallets and additional important information.
5. Synthetic Identity Theft
One of the faster-growing forms of fraud, Synthetic Identity theft, is a highly sophisticated crafted fraud that uses personal consumer data (Aadhar card numbers, PAN card, birthdays, addresses) to create new fictitious identities designed to look like actual users with good credit history.
The scammers opt-in for numerous financial frauds, opening new bank accounts, applying for loans, defaulting on credit card bills, all on account of a real user’s name, birthday, and address (among others).
There is a big playground for hackers and scammers to steal identities and commit identity theft fraud on the pretext of a real user. Apart from opting for fraud solutions, it is imperative to keep a check and monitor the accounts for any suspicious activities.