9.4M online U.S. adults were victimized by identity theft in year ending April 2004 –Losses amounted to $11.7 billion Online theft is escalating The solution revolution: –ISPs will provide automated desktop protection tools –Holistic back-end fraud detection systems will roll out to U.S. FIs –By YE 2006, more than 2 million U.S. consumers will use strong two-factor authentication to access their accounts at leading Web sites (0.6 probability). The Escalation of Online Fraud Will Lead to a Solution Revolution

Source: U.S. Attorney's Office, Philadelphia Drug Lords Turn to Identity Theft and Exploit Insiders Identity Theft Crime Ring Manufacturer Concierge Insider (e.g., teller) Crack addicts

More-technically sophisticated hackers More account takeovers More electronic data = bigger thefts Checking account fraud increasing –successful credit card fraud decreasing New-account fraud attacks shifting to smaller lenders –thieves opening small business accounts More consumer awareness: Some consumers claim ID theft rather than pay debt Troublesome Trends

Consumers typically discover Fraud on their own Fraud Top ways consumers discovered fraud New-account fraud Denied credit, Saw charge on credit card statement Check forgery Saw charge on check account statement Unauthorized DDA transfers Saw charge on check account statement Credit card purchases Saw charge on credit card statement Credit card cash advances Card company called Saw charge on credit card statement

Strategic Planning Assumption Credit issuers will misclassify more than 60 percent of identity theft as credit loss in 2006 (0.6 probability).

What Worried Consumers Want From Service Providers for Added Security Not at all Desirable Extremely Ask me questions online that only I can answer when logging in Authenticate themselves to me; for example, with shared secret message Use separate device, such as cell phone or card for online account access 3.6 Give me program to download that prevents hacker from intercepting 2.6 Base: 5,000 online U.S. consumers; those who are very worried about security (April 2004) What would you like your online service provider to do to improve the security of your information? Make service provider legally responsible for strict security measures

Strategic Planning Assumption If phishing antidotes are not implemented, consumer trust will erode and annual U.S. e-commerce growth will slow to 10 percent or less by 2007 (0.6 probability).