Steps to protect against identity theft and cross-industry fraud
The good news is that organizations are already taking steps to prevent these scenarios. For example, according to the LexisNexis survey, 62 percent of organizations have taken steps in the past year to protect customer data, and nearly one-half are now using data analytics as part of ID verification processes. Spending priorities are also shifting to reflect this reality, with 24 percent of organizations increasing their spending on IT systems, 20 percent boosting their spending on cyber training, and 19 percent adding new employees and staff in order to combat the problem.
Despite these efforts, it’s clear that the hackers are winning. This is reflected in the changing strategic priorities of fraud mitigation professionals. They are now spending more time and energy locating and obstructing suspicious transactions, especially when it comes to fraudulent claims and refunds, which remains the most at-risk form of customer interaction.
Financial impact of cross-industry fraud
What’s perhaps most troubling is that cross-industry fraud and identity theft are no longer just annoying problems that slow down organizations and force them to construct elaborate new defense mechanisms. As the LexisNexis report makes clear, there is a very real financial impact on the bottom lines of organizations. For example, a staggering 80 percent of respondents said that cross-industry fraud had a moderate-to-high impact on the bottom line, and more than 50 percent said the impact was extreme to high.
In other words, a deluge of fraudulent claims, refund requests and applications is starting to have a very real impact on the earnings that companies are reporting. For example, a healthcare organization dealing with fraudulent medical care claims resulting from medical identity theft may be inadvertently paying for services or procedures that never actually took place.
Is it too much to assume that these organizations, crippled by data breaches and rampant identity theft, might start passing on some of these costs to consumers? Given that the financial services sector is the most at-risk of cross-industry fraud, it’s not out of the question that higher bank fees and soaring transaction fees might be the ultimate result of beefed-up recovery plans and anti-fraud mechanisms. Within the healthcare sector, it might mean higher insurance premiums and more expensive healthcare procedures.
Given the size and extent of the problem, are there really any realistic solutions? One solution proposed by the LexisNexis report is simply more cross-industry collaboration. If fraud mitigation professionals from a variety of different industries can work together, for example, they might be able to clamp down on the most egregious forms of abuse. Working in partnership with regulatory bodies such as the U.S. Federal Trade Commission, they can reduce the ability of hackers to commit fraud.
“Cross-industry fraud cases are statistically speaking much more expensive for organizations than fraud that happens due to one isolated event,” said Vikram Dhawan, Senior Director of Product Management for Identity and Fraud at LexisNexis Risk Solutions. “The vast expense from these complex cases in turn raises the cost of services for every consumer. Our study shows that the volume and cost of cross-industry fraud is increasing, so it’s in the best interest of organizations to work together to share information and available data in the interest of prevention. By doing so, fraud can’t be used as a competitive advantage because sooner or later it impacts everybody.”
At the very least, they can pool resources to identity fraudulent account numbers, track down known hackers and share updates about new types of identity theft, much as law enforcement agencies pool their resources to locate and track down criminals. The could also send out cross-industry fraud alerts. Another solution is to beef up spending on data analytics as part of fraud mitigation programs. Sophisticated data analytics programs might be able to spot suspicious transactions much more quickly, thereby averting fraud in the first place.
Clearly, organizations need to become much more proactive when it comes to protecting customer data. That’s especially true in the era of Big Data, when data flows freely across not just organizations, but also entire industries. The problem of cross-industry fraud shows no signs of stopping, and the costs are simply becoming too high to bear.