Data Breach and Identity Fraud: How to Proactively Mitigate Fraud Loss
By Vickie J. Storm Chief Marketing Officer, NXG Strategies
T
he growth of online shopping increased risks associated with consumer identity theft and fraud. These concerns escalated in the early 2000s with some high profile “breakins.” Today, identity theft has reached a new level of concern. Consumers no longer speculate whether or not they will become a victim of identity fraud, but rather when and how often their personal information will be obtained and used fraudulently. In many cases, financial institutions are paying the price for these security breaches. According to a study released by Javelin Strategy & Research in February 2012, one in 20 individuals became victims of identity theft in 2011. In 2011, there were 7.7 million victims of debit card and credit card fraud. Identity theft losses totaled $18 billion. Time spent trying to recover from identity fraud can amount to many hours – not to
mention the mental and emotional anguish that consumers experience. Today, the targets most at risk include small businesses. Identity thieves know that small business fraud typically yields higher returns than consumer fraud due in part to higher credit limits. Furthermore, cyber hackers know that small businesses house large numbers of personal records that can be sold very profitably on the black market, used for fraudulent purchases, or used to falsify “identification” for perpetrators. Businesses face greater challenges and expenses than ever before in protecting the security of their data. Many do not have the manpower or the resources to manage the escalating costs of fraud losses and maintaining a strong risk management infrastructure. According to an upcoming study from the Identity Theft Resource Center (ITRC), previewed in January 2012 by “Information Week,” 22.9 million records were affected in breaches that were publicly disclosed in 2011. Attacks by hackers were the leading cause of data breaches for the year, responsible for 26 percent of all known data breach incidents. A small business that suffers a data breach must respond by notifying affected customers and, to protect both the customers and its own reputation, provide services such as credit monitoring. Responding to a breach diverts attention from running the business. The combination of loss of focus, expenses to respond, and damage to the reputation of the damage can be devastating to the small business and can even call into question its longer-term viability. Financial institutions are affected as well. They often bear the burden of investigating and
NXG Strategies, LLC, founded in January 2005, is a pioneer in the industry of identity fraud identification and resolution and corporate risk mitigation, working with many of the nation’s organizations and financial institutions to provide quality programs for the protection of consumers and companies at risk. NXG Strategies understands the impact of record breach and fraud on both consumers and small businesses, not only for these individuals and entities but also for the financial institutions that often must bear the cost of fraud losses. Their services include complete response plans for breach incidents, fraud monitoring to detect fraud early and prevent damage, and fully managed recovery when fraud occurs. With a full suite of solutions, they effectively serve the needs of accountholders and small businesses, while at the same time helping to reduce expenses associated with fraud risk mitigation, ultimately helping the financial institution to improve ROE. 16 Virginia Banking | March/April 2012
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