Ten years ago, our industry was grappling with how best to combat the growing problem of third-party fraud. And while we’ve made significant progress on that front, a new threat has come to the forefront.
First-party fraud, which includes synthetic identify fraud, is fraud committed by individuals who have no intent to pay and that use a mix of authentic and fabricated identity details to intentionally defraud.
This type of insidious threat can be difficult to detect and report. But what we do know is that the impact is substantial. According to the Federal Reserve, charge-off rates have increased almost 10 percent, nearly doubling the 5 percent average maintained over the past 18 years. And the associated losses stemming from such attacks can amount to 10 times the size of third-party fraud and can comprise between 10 and 35 percent of bad debt.
Clearly first-party fraud and synthetic identity fraud is an area of growing concern, exacerbated by difficulties of identifying these attacks, but there are ways the industry is fighting back.
In October, Visa implemented new chargeback and fraud monitoring rules, lowering long-standing thresholds to help businesses manage their risk and the risk introduced into the payments system. Beyond tighter fraud monitoring, verifying a person’s identity goes a long way in preventing these fraud occurrences. And new advancements in identity verification technologies and processes—like the following three solutions—can be tools in a community bank’s arsenal to increase transaction security.
ICBA Bancard will be incorporating all these technologies into our offerings as they come online. It’s yet another way we help community banks flourish in an evolving payments ecosystem. By leveraging new security measures and other solutions as they become available, community banks can mount a counterattack and keep their bank and their customers’ safe.
Tina Giorgio is President and CEO of ICBA Bancard, the payments services subsidiary of ICBA.