Last year, the amount of money lost to fraud dropped 11 percent -- from $18 billion in 2013 to $16 billion in 2014.
But those numbers are actually an improvement, according to a new study by Javelin Strategy & Research. Last year, the amount of money lost to fraud dropped 11 percent, down from $18 billion in 2013. And in 2012, the amount was even higher, at $21 billion.
The number of victims is down too, dipping 3 percent in 2014.
Though hacks appear to be growing in size and targeting larger retailers, financial institutions have also gotten better at performing triage after such an attack occurs.
“The combined efforts of industry, consumers, and monitoring and protection systems that are catching fraud more quickly helped reduce the incidence of fraud and the amount stolen over the past year,” said Al Pascual, director of fraud and security at Javelin, a consulting firm that analyzes consumer transactions. “When detected, fraud is being resolved quicker than ever before.”
After 110 million credit card numbers were stolen in the December 2013 Target breach, for example, banks went on the offensive, spending more than $200 million to replace consumer credit and debit cards.
In 2014, 1 in 4 consumers received data breach notifications, but a smaller proportion of those people became fraud victims than in 2013. Last year, fraud incidents among notified breach victims dropped 17 percentage points to 13.7 percent, the lowest rate since Javelin began conducting its annual study in 2004.
The report hypothesized that the huge number of data breaches in 2014 may have spurred banks and retailers to take such attacks more seriously, driving down the incidents of fraud. Improvements in technology that can help detect fraud also contributed to the decline, the report said.
Pascual warned that despite dropping reports of fraud, consumers should still be wary of identity theft.
“We have seen declines in the past, but they have reversed as fraudsters try new approaches or when new technologies make it easier for fraudsters to get consumer information,” he said.
For instance, while new-account fraud (in which a fraudster uses stolen information to open an account in a victim’s name) reached record lows in 2014 according to the Javelin report, this year such incidents have increased due to security weaknesses in Apple’s new mobile payments system, Apple Pay.
In the Javelin report, 13 percent of victims of new-account fraud did not detect the identity theft for more than a year.
Though 2014’s number of victims was down, 2013 had the second-highest number of identity theft victims since Javelin began its annual study.
In the end, said Pascual, more breaches will result in more victims of identity theft. In 2014, two-thirds of identity fraud victims had previously received a data breach notification that year.
“This is a long, drawn-out battle against identity thieves,” he said. “While there have been some victories this year, there have also been some discouraging setbacks. It really reinforces why we need the combined efforts of industry, consumers, and monitoring and protection systems working together to continue the downward trend.”
Javelin’s report was based on a sample of 5,000 U.S. adults, including 790 fraud victims.
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