Synthetic ID Fraud Accounts for 20% of Credit Card Losses

Synthetic ID Fraud Accounts for 20% of Credit Card Losses

August 22, 2019

Synthetic ID fraud is increasingly becoming a thorn in the side of both the payments industry and consumers. Synthetic fraud occurs when criminals combine both real and fake information to create new identities that can be used to commit payment fraud. Research finds it accounts for nearly 20 percent of credit card charge offs. It is also responsible for an increasing amount of fraud losses reported by digital merchants.

The Federal Reserve published a report recently on synthetic identity fraud, and its impact on the U.S. payment system, and identified the trend as the “fastest growing type of financial crime in the United States.”

The most recent State of Card Fraud 2018 report from Rippleshot estimates synthetic fraud represents 85 percent of all identity fraud in the U.S. The report also reveals synthetic ID fraud accounts for 80 percent of all credit card fraud losses, and nearly one-fifth of credit card charge-offs.

The government research notes synthetic identities tend to be more common in the United States than in other countries because identification in the United States relies heavily on static personally identifiable information (PII), including Social Security numbers (SSNs).

Among some of the other findings included with the report’s findings:

  • 85-95 percent of credit applicants identified as potential synthetic identities are not flagged by traditional fraud models.
  • Synthetic identity fraud cost U.S. lenders $6 billion in 2016
  • The average charge-off balance per instance of synthetic identity fraud in 2016: $15,000

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Joan Goodchild

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