According to an article at Forbes, identity theft and related fraud were up considerably in 2009 with 11.2 million victims for an estimated cost of $54 billion U.S. dollars. In 2008, just under 10 million people were ripped off as a result of identify theft, for an estimated cost of $48 billion. Interestingly, the cost to individuals as a result of data breaches has declined from $498 in 2008 to only $373 in 2009. Who, then, is picking up the tab for identity theft incidents? Increasingly it’s the financial institutions with whom we entrust our money.
That means financial services are absorbing a much larger chunk of fraud losses, says Javelin president James Van Dyke. “Businesses are really stepping up,” he says. “Even as the cost of fraud mitigation becomes higher, they’re bringing the out-of-pocket expense for victims closer and closer to zero.”
It seems that banks are willing to absorb an awful lot of the expense associated with identity theft prevention and mitigation in order to retain customers. Losing a customer means lost money for the bank, and attracting new customers requires a non-trivial expense. It must be cheaper, in the long run, for banks to pick up the costs from identity theft incidents then to lose new customers or try to attract new ones. (And of course, if a bank is known to be associated with identity theft problems, they’ll have a harder time attracting new customers.)