Especially in this new digital era where personal financial account security is crucial. Beyond that, an insidious identity crisis has recently infected the banks themselves, putting consumers at increased risk for fraud and theft. Read this article to explore why identity verification continues to fail the banking industry. When paired with real-world cases and expert forewarning, it paints a pretty alarming picture of what might be happening to your personal accounts. Calloutcoin.com provides comprehensive coverage of digital identity trends and technologies. In addition to bringing you the latest developments, we offer you practical tips that you can take to stay safe.

The Alarming Reality of Identity Theft

All of these factors make identity theft a very profitable venture for today’s cybercriminals. On the Dark Web, a stolen identity goes for a jaw-dropping median price of $21.35. This accessibility makes it an easily exploitable commodity for anyone looking to manipulate the financial system. That open door and low barrier to entry makes it easy for practically every type of fraud to run rampant. Specifically, card-not-present (CNP) fraud and synthetic identity fraud (SIF).

CNP fraud, where a credit card is used without any physical card being presented, is a major issue. The startling trends of the 2016 Aite credit card fraud survey, found by this payment research firm. They estimated that losses from card-not-present (CNP) fraud would reach a mind-boggling $7.2 billion by 2020. The combined CNP loss across the U.S. over that four-year time span was estimated to be a mind-boggling $25.9 billion. That highlights a major failure in banks’ capacity to validate the identities of their customers. Fourth, they face tremendous challenges with web-based and even phone-based transactions.

Synthetic identity fraud (SIF) is the third top threat. These schemes require the development of completely phony identities by stringing together real and invented information. Scammers are always creative with their approaches. They can attach a legitimate Social Security number to an unused name, link an unused Social Security number to a legitimate name, or create both the SSN and the name entirely. In 2014, Gartner, a technology research firm, testified that SIF schemes accounted for 20% of credit charge-offs. They shockingly accounted for 80% of losses related to all card fraud. This represents a profound failure of banks to know when they are accepting and validating a fake identity.

Examples of Identity Verification Failures

At least three major, real-world catastrophes serve as reminders of the deadly consequences of identity verification failures. In one case from 2013, a New Jersey fraud ring produced 7,000 fake IDs, leading to the fraudulent acquisition of more than $200 million. This brazen operation is a stark reminder of how easily criminals can exploit gaps in identity verification. Financial institutions should shore up their procedures to stop this kind of exploitation.

Just as one example, last year an Aite report estimated U.S. loan application fraud losses in 2015 to be $966 million. Projections showed this shortfall growing to estimates of about $1.37 billion by 2017 and $2.1 billion by 2020. This is the reality today, fraudsters are getting more savvy. In order for banks to stay ahead of this emerging threat, voice authentication is not enough.

The tidal wave of data breaches doesn’t help ease the pain either. In 2016 alone, there were 4,149 data breaches and 4.2 billion records exposed. The role of the U.S. These actions profoundly affected all three of these incidents. It was responsible for 47.5% of the breaches and an appalling 68.2% of the exposed records. Almost every breach results in the release of stolen personal information onto the Dark Web. This contributes to identity theft and fraud, providing criminals a shortcut to take advantage of others.

Cerby CEO's Warnings and the Risks to Personal Accounts

Cerby CEO, Vidal Gonzalez, has been vocal about the identity verification failures plaguing banks and the potential risks to individuals. Sullivan notes that when most banks verify identity, they still lean on age-old practices. These alternatives, such as knowledge-based authentication (KBA), are easily circumvented. KBA has users answer security questions based on public knowledge. For instance, it will ask for their mother’s maiden name or the name of their first pet. Any child with the ability to navigate a social media account or public record could answer these questions.

Gonzalez warns that the impact of these failures can be devastating. Cybercriminals can leverage stolen or synthetic identities to get new accounts, apply for loans, and make unauthorized purchases. This leads to heavy financial penalties for man or woman, as well as irreparable harm to their credit score and public standing.

Actionable Advice to Protect Yourself

Here are some actionable tips:

Strengthening Your Security Posture

  • Enable Multi-Factor Authentication (MFA): MFA adds an extra layer of security by requiring you to provide two or more forms of identification when logging into your accounts. This could include a password, a code sent to your phone, or a biometric scan.
  • Monitor Your Account Activity Regularly: Check your bank statements and credit reports frequently for any suspicious activity. Report any unauthorized transactions or accounts immediately.
  • Use Strong, Unique Passwords: Avoid using easily guessable passwords, such as your birthday or pet's name. Use a combination of upper and lowercase letters, numbers, and symbols. Use a password manager to store and generate strong, unique passwords for each of your accounts.
  • Be Wary of Phishing Scams: Phishing scams are designed to trick you into giving up your personal information. Be cautious of emails, texts, or phone calls that ask you to provide sensitive information, such as your Social Security number or bank account details.
  • Freeze Your Credit: Consider freezing your credit with all three major credit bureaus (Equifax, Experian, and TransUnion). This will prevent criminals from opening new accounts in your name.

Understanding The Risks

  • Recognize the dangers of open access: Cybercriminals often exploit open access systems to gain unauthorized entry into sensitive data.
  • Acknowledge the prevalence of compromised credentials: Over 80% of breaches are linked to compromised credentials, emphasizing the critical need for stringent password management practices.
  • Stay informed about the financial incentives for cybercrime: The median price of a stolen identity is $21.35, showcasing the economic motivations behind cyberattacks.

The Path Forward: Enhanced Security Measures

Fixing the identity crisis in banking takes a layered effort. To ramp up their defenses, banks should invest in more sophisticated identity verification technologies, like biometric authentication and behavioral analytics. AI and machine learning can be used to quickly identify and flag instances of fraudulent activity or prevent unauthorized access to accounts.

  • Biometric Authentication: Using unique biological traits like fingerprints, facial recognition, or voice patterns to verify identity.
  • Behavioral Analytics: Analyzing user behavior patterns to detect anomalies that may indicate fraudulent activity.
  • Knowledge-Based Authentication (KBA): Verifying identity through challenge questions based on personal information.
  • Risk-Based Authentication (RBA): Assessing the risk level of a transaction or login attempt and adjusting the authentication requirements accordingly.

Banks can do a better job protecting their data security practices so that their data doesn’t get hacked. This means building in strong encryption, going beyond basic patching of vulnerabilities, and having employees trained on cybersecurity best practices. Collaboration between banks, law enforcement, and cybersecurity firms is therefore crucial to both combat identity theft and fraud, and restore the public’s trust in our institutions.

By taking these steps, banks can strengthen their identity verification processes and protect their customers from the growing threat of fraud. While collaborative, it is always ongoing vigilance, innovation, and efforts to protect personal financial information.

CalloutCoin.com will continue to offer thoughtful civilizational analysis of digital identity solutions and NFT standards. Plus, we’ll discuss the intersection of metaverse technologies and trends with DeFi. Keep an eye out for more updates about how to keep yourself safe in today’s constantly changing digital world.