YOU may be shocked to know one in four of us have suffered fraud online when we buy, borrow or transfer money. The numbers are staggering.
The Home Office Identity Fraud Committee reports consumer identity fraud costs the UK £1.2 billion annually. That’s an average of £481 out of the pockets of the 2.6 million of us who suffered fraud. Latest equivalent card fraud stands at an additional £220m.
The media is rife with stories of fraud victims being refused credit and having banks suspend their accounts, creating great stress while investigations take place. It’s not what we expect – being made to feel like the very criminals who made off with our hard-earned money when we report fraud, we feel completely untrusted. Rightly or wrongly, we feel victimised twice. First, by the fraudsters who prey on us online. Second, by the very finance sector that encourages us to transact online.
While our banks recover profits post the banking crash, and benefit from lower costs of offshoring, automation and e-commerce, online banking fraud climbed another 28 per cent in the first half of 2012. It’s not just us consumers. It impacts on struggling retailers trying to recover from the credit drought arising from the very same banking crash. The British Retail Consortium estimate the annual cost of identity theft to retailers at £205m.
Recent press reports regarding NatWest and Santander show banks are causing real hardship for their customers. The well-publicised Wonga.com frauds have simply added a new, ominous, dimension. It now may take as little as 15 minutes to wreck your financial identity, contrasting the six months-plus to recover your credit standing. Once, of course, you know you’ve been defrauded…
While the finance sector’s complete dependency on data you never authorise for use resigns you to the painful human and financial consequences of fraud, you’re left to pick the pieces up traditional-style. So, who should trust who?
The politicians are now concerned. Andrew Tyrie, chairman of the Treasury Select Committee is asking questions. Banks need to restore trust in their relationships with online customers.
How did we get into this unsatisfactory mess? As the online era emerged, banks added layers and layers of technology and security over their existing finance systems so we could become direct users. The problem is, we are not users. We are customers. The two are entirely different.
As a user, we’re expected to remember more and more passwords, codes, and PINs. We have to use card readers for this, and different procedures for that. It’s no wonder we get confused. After all, we don’t work for the banks, they actually work for us, don’t they? And users don’t suffer fraud. Customers, real people, do.
After some ten years of bank-imposed, complex security methods that have hugely inconvenienced and frustrated us, the banks have simply created a feast for fraudsters. That’s because, as complex as it is to transact for us online, it’s completely predictable to those devious enough to want to steal our identity. The downside of any system is that it works by having standard ways to do things, on standard data like name and account. What it doesn’t do is put you, the customer, in control.
Trust is built through transparency, not diktat. Twenty years ago, you’d get a loan by speaking with your bank manager, who likely knew you. There would be a diligence process that took a little time but everyone knew where they stood. In fast-paced 2013, there is no manager. You can be completely anonymous and get a loan in 15 minutes using data that’s apparently readily available, and you don’t confirm it’s you! How does that keep you safe?
Until the banks and businesses that want us to transact online give us back control of our own identities, rather than relying on data that we never see or authorise, they will remain harbingers of identity theft.
• Dr David Lanc is founder & CEO of Payfont Ltd