April 28, 2006, 12:00 AM

Going up: Online fraud’s cost

Internet Retailer

Consumers are getting smarter about avoiding identity fraud, suggest the findings of Javelin Strategy & Research’s 2006 Identity Fraud Survey. But with the numbers on some key indicators declining since the survey was last taken in 2005, the rising average cost of Internet-based identity fraud has the dubious distinction of bucking that trend.

Overall, occurrences of identity fraud are down from last year. The number of U.S. consumers who have been victims of any kind of identity fraud is down to 8.9 million this year from 9.3 million last year, and the percentage of identity fraud victims as a percentage of the U.S. population dropped as well, to 4% this year from 4.25% last year.

Compared to the offline threat posed from information breaks such as lost or stolen wallets or outright information rip-off from trusted associates, information breaches of home computers pose a less significant risk, accounting for only about 9% of all fraud in the category, in cases where the source of the information break was known.

But the dollar value of identity theft incidents-with increases in average cost of identity fraud traceable to information breaks through the Internet-is up significantly. Though the cost of identity fraud traceable to means such as stolen mail or garbage is down 14% from last year, the average cost of fraud attributable to online transactions, phishing, spyware and hacking has had a major increase, from $2,897 to $6,432. That 9% of all identity fraud that falls in the Internet camp now represents about $5.2 billion, according to Javelin.

The Internet also remains a venue in which criminals put stolen information to use, according to Javelin. While about 70% of fraudulent activity is conducted through traditional channels such as in person, by phone or by mail, about 29% is conducted through the Internet, including the 18% that represents fraudulent online purchases and 11% involving online transactions not involving purchases.

The takeaway? Concludes the report: “The vigilance of consumers and businesses must continue.”

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