Net fraud and the truth
Javelin Strategy & Research founder James Van Dyke says it's time to get the facts right about identity theft.
A consumer stands a greater chance of being struck by lightning than falling prey to identity theft after paying a bill online. In fact, individuals actually reduce their overall risk of identity theft when they participate in some online monetary transactions.
But as electronic transactions proliferate, consumers will naturally want to weigh the benefits against the risks. And to be sure, identity theft is growing. The Federal Trade Commission pegs it as the nation's fastest-growing crime. Still, it's no exaggeration to say the misperception is one of the main reasons consumers are staying away from all types of electronic commerce.
Twenty-seven million Americans became fraud victims during the last five years, one-third of whom were targeted during the last year alone. That has cost financial institutions, merchants and other businesses an estimated $46.9 billion annually.
The average new-account identity theft case costs businesses $10,200, with a $1,180 out-of-pocket hit to customers that's followed by 60 agonizing hours of restoring personal records and reputations back to health.
Ironically, consumers are afraid of the very antidote to the problem.
We've found that consumers can reduce their likelihood of being victimized by 10.4 percent through the use of some online services, such as banking, bill payment and account management. If all Americans started to fully use available electronic banking and bill payment services tomorrow, some $2.37 billion in identity fraud would be prevented during the next year, while another $2.5 billion would be saved in the same time frame period through improved detection.
So what's the hang-up? Security fears represent the largest obstacle in getting consumers to bank and pay bills electronically. That points to a need for an industry-led campaign to highlight the benefits of electronic transactions, since in reality, an educated public is a far more protected one.
| We need to get the facts straight about identity theft and the Internet and stop scaring consumers away from the antidote to a $47 billion national problem. |
Dishonest relatives and acquaintances swipe the personal information necessary to perpetuate the crime from pieces of paper; others scrounge through trash bins for discarded checks, deposit slips and credit card statements, or steal statements and the like right out of mailboxes. Switching to electronic statements and checks is a cost-free means for consumers to reduce their chances of becoming the next victim of identity theft and fraud.
Expanding the argument in favor of managing bank and other financial accounts is the ability to track activity in real or near-real time. While paper statements come in the mail for a monthly viewing, electronic statements can be viewed at any hour of the day and as frequently as desired, even from remote locations.
And, as consumers increasingly receive e-mail alerts of certain account activities--such as payments, withdrawals or balances that fall below minimum levels--they are nearly four times more likely to spot suspect transactions ahead of individuals who get monthly paper versions in the mail.
Those all-too-common lists of identity theft prevention tips need to start including what to do on the Internet, not just what not to do.
| Ironically, consumers are afraid of the very antidote to the problem. |
But banks and billers need to start offering more online services, and they need to allow consumers to turn the paper off. Consumers should switch from paper and mail services to online banking, billing and payments, and in the process, they'll reduce their risk of becoming the next victim. With a potential $4.86 billion in nationwide identity theft reduction, everyone but criminals will be benefit.