Will synthetics be a grinch who stole Christmas this Black Friday?

by Carmel Maher

Carmel Maher

‘Twas the night before Black Friday and as retailers were preparing for the masses, synthetic identities were slipping past lenders’ fraud defenses…

The holiday shopping season is upon us and 2019 retail sales are predicted to mark the first-ever trillion-dollar season. A banner year for consumer spending, could lead to an all-time high for individuals applying for credit to help fund their holiday gift purchases. Unfortunately, fraudsters do not take time off for the holidays. In fact, they may be capitalizing on seasonal spikes in application volume to test their ability to more easily evade fraud detection processes.

Since 2015, we have researched cross-industry trends in credit applications on Black Friday and Cyber Monday. Year over year we have seen credit application volumes significantly increase during Black Friday weekend—in 2018 retail credit was 4xs higher than a typical shopping weekend. Not surprisingly, this is an industry where we would expect to see dramatic increases in credit applications during the holidays as retailers roll out doorbuster specials on top-rated gifts.

Because, historically, we have seen retail card issuers experience the highest increase in card applications on Black Friday, this year we focused on emerging challenges facing this industry.

A recent ID:A Labs study, that isolated synthetic credit applications based on their assessment by ID Analytics’ fraud solution ID Score® Synthetic, discovered that most of these high-risk applications were targeting the retail and wireless space, followed closely by credit card (see Figure 1).

Black Friday high-risk synthetic applications

Figure 1. Percent of very high-risk synthetic credit applications by industry

With anticipated higher volumes of credit applications across retail, wireless and credit card this holiday season, lenders and service providers should be on high alert for synthetic identities—the most challenging type of fraud for enterprises to detect. Synthetics are created using fake information where the implied identity is not associated with a real person, which makes them difficult to verify. Once an identity is established, these fraudsters can operate undetected for years building up credit with multiple institutions before maxing out their lines of credit and vanishing without a trace. With no identifiable perpetrator or self-reporting victim, enterprises bear the brunt of the damage caused by synthetic fraud.

Like a grinch, synthetics can’t keep Christmas from coming. However, they can steal the joy of the season from lenders that may experience higher losses due to synthetics successfully circumventing their fraud defenses. Don’t let synthetics be like a grinch who stole Christmas this year. ID Analytics can help. Our team recently presented on critical trends in the evolution of synthetics and advancements being made to address this rising threat. To learn more watch the on-demand webcast, Truth from Fiction: How Synthetics Will Continue to Evolve in 2020.



Carmel Maher is the Product Marketing Insights Manager for ID Analytics