How the Right Identity Strategy Can Deliver Both Convenience and Security
With U.S. consumers losing a median of $4,967 to fraud schemes in 2024 — nearly triple the global average — the stakes have never been higher. They face a frightening balance: tighten security measures and risk creating friction that drives away potential customers, or maintain convenience and potentially expose themselves to sophisticated fraud schemes.
By Sean Flynn, Vice President, Card and Banking Business at TransUnion
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Nothing is more critical to the growth of financial institutions than the trust of their existing and future customers. But safeguarding this trust is especially difficult in today’s climate where digital fraud is becoming increasingly invasive — and expensive. To succeed, consumers must believe in your ability to shield them from fraudster schemes and attacks. They need to genuinely feel protected when they interact with you.
The most effective way to achieve this sense of security is through safe, seamless and personalized interactions. This starts with the integration and management of consumer data across all channels and touchpoints to achieve a unified view of identity. More than simply protecting against financial losses, adopting a unified view of identity can ultimately boost business performance through experiences that inspire confidence, build trust and foster loyalty.
Want more insights like this? Check out Elan’s content portal: Credit Card Issuance: Strategies & Solutions
The Compounding Consequences of Identity Fraud
According to TransUnion’s State of Omnichannel Fraud Report (H1 2025 Update), the first half of 2025 is seeing a surge in fraud:
- 20% of U.S. consumers reported financial losses in the second half of 2024
- The median reported loss stands at a shocking $4,967, nearly tripling the global median of $1,747
- When extrapolated to the entire U.S. population, the amount lost to email, online, phone or text messaging fraud calculates to approximately $265 billion
This troubling trend is intensified by fraudsters’ abilities to attack anywhere, at any time, threatening the entire account lifecycle — and leaving many financial institutions struggling to keep up. All indications point to the increasing use of identity data to focus on high-yield, short-term payoffs, such as account takeover (ATO) and credit abuse. Smishing (fraud via SMS or text messages) is currently the most reported scheme in the US. And financial institutions’ exposure to synthetic identities, which reached an all-time high of $3.3 billion at the end of 2024, continues to increase.
Staggering Financial Repercussions
If not every, most U.S. lending institutions feel the sting of fraud. Delinquencies, margin compression and an evolving competitive landscape make fraud losses a costly proposition. Smaller financial institutions like credit unions and community banks are particularly vulnerable, with lax security measures contributing to 12% of reported fraud losses, according to Coin Law. And in the bankcard space, increasing fraud-related balances and charge-off expenses are impairing issuer profitability. For instance:
- Credit card delinquencies are expected to grow by 4.4% in 2025 (TransUnion 2025 forecast)
- Outstanding balances attributed to suspected synthetic identity fraud exceed $4.6 billion (State of Omnichannel Fraud, Hx 202x Update)
- Balances from bust-out activity increased 20% in a 12-month period and are well above pre-pandemic highs (TransUnion consumer credit database)
Cumbersome identity reviews can slow down new account opening, and integrating platforms and processes is particularly challenging for financial institutions that lack the resources (time, expertise and budget) for custom builds and connections. These operational hurdles impact profitability and hinder the ability to provide seamless and secure experiences.
The cost of fraud extends beyond direct financial loss. Consumer sentiment, which influences trust and loyalty and can translate to acquisition and retention, is just as much at risk. Consumers want to be treated as trustworthy by the brands they choose, and every touchpoint affects their perception of safety, security and convenience. If they perceive an organization isn’t protecting them, they’ll find one that will. The most recent State of Omnichannel Fraud Report shows 59% of consumers surveyed reported they’re likely to switch providers to get better omnichannel experiences.
Dig deeper:
- Unpacking Credit Card Challenges and Opportunities for Growth
- Are Consumers Buried Under Too Much Debt? A New Report Says Maybe Not
- Lending Will Accelerate in 2025 As Consumers Get Used to Today’s Interest Rates
Between a Rock and a Hard Place
Banks and credit unions strive to let only legitimate consumers through the front door; however, maintaining the right balance between convenience and security is increasingly challenging due to the persistent nature of fraud. Shoring up defenses online and in the phone channel is costly, time consuming and can add unnecessary friction — which degrades consumer experiences.
The negative impact of friction is profound: Meridian Link found 68% of consumers abandoned online applications for financial services due to friction. And Bain & Company adds, “A loyal, affluent customer is worth nearly three and a half times more than an average one, and a disgruntled customer is downright unprofitable once you factor in the effect of negative word of mouth.”
This can put financial institutions in a tough spot — potentially facing a consumer-unfriendly posture if they don’t have the right elements in place.
Why Identity is the Key
A unified view of identity isn’t just a strategic advantage — it’s a necessity for protecting accountholders, building trust with consumers and driving business performance. Recognizing the primary causes and drivers of today’s fraud trends helps explain why.
One of the biggest challenges for financial institutions, particularly those without dedicated data science teams, is keeping up with the rapidly evolving fraud landscape. Often, they’re contending with fragmented, disparate data from online, offline and call center channels and none of this data can talk to each other. They lack a singular, reliable view of fraud, risk and identity.
And if identity isn’t done right, then everything done with it — every decision based on what is known about a particular consumer — will be wrong. Examples of the fall out include allowing a high-risk individual to reach and socially engineer a call center agent, or allowing a synthetic identity into a credit portfolio — which then builds credit for over a decade before maxing out their credit lines with no intent to repay (aka busting out).
Getting Identity Right
Achieving a unified view of identity that integrates fraud signals from various channels is essential for effective fraud prevention. Hitting the mark takes a multifaceted approach that incorporates robust policies, advanced technologies and continuous monitoring. In short, you’ll want to:
• Establish a centralized identity management policy to lay the foundation for a secure identity framework that covers all aspects of verification, access control and user authentication.
• Integrate consumer data across all channels — offline, online, digital and phone — to create true pictures of consumers that power identity verification and risk mitigation: credit, consumer, device, behavior, etc. If different business units (card vs. mortgage vs. deposits) don’t share information and use fragmented views of identity, they’re putting the business more at risk of fraud. A singular view of identity and fraud risk enables more accurate identity resolution and effective fraud prevention. Advanced authentication methods, such as multi-factor authentication (MFA), biometrics and single sign-on (SSO), further enhance security while minimizing friction for users.
• Integrate with current systems, platforms and processes to help reduce friction, ensure consistent access control, minimize security gaps and improve overall user experiences. For banks and credit unions without dedicated data science teams, adopting tools that provide sufficient signal and risk insights early in the onboarding process can help effectively mitigate fraud.
• Implement passive fraud detection — Internet Protocol (IP) risk, device risk, device to identity risk — behind the scenes to preserve the customer experience while reducing digital risk.
• Monitor and audit access patterns and user activities continuously to detect and respond to potential threats. Regular audits help maintain compliance with regulatory standards, including know your customer (KYC) and anti-money laundering (AML) processes, and ensure access controls are up to date.
To learn more about how identity can help enhance security, reduce fraud-related losses and provide superior consumer experiences that foster trust, watch The Key to Fighting Fraud Across the Account Lifecycle.
