9.4M online U.S. adults were victimized by identity theft in year ending April 2004

– Losses amounted to $11.7 billion

Online theft is escalating

The solution revolution:

– ISPs will provide automated desktop protection tools

– Holistic back-end fraud detection systems will roll out to U.S. FIs

– By YE 2006, more than 2 million U.S. consumers will use strong two-factor authentication to access their accounts at leading Web sites (0.6 probability).

The Escalation of Online Fraud Will Lead to a Solution Revolution

Source: U.S. Attorney's Office, Philadelphia

Drug Lords Turn to Identity Theft andExploit Insiders

Identity Theft Crime Ring

Manufacturer

Concierge

Insider(e.g., teller)

Crack addicts

Crack addicts

More-technically sophisticated hackers

More account takeovers

More electronic data = bigger thefts

Checking account fraud increasing

– successful credit card fraud decreasing

New-account fraud attacks shifting to smaller lenders

– thieves opening small business accounts

More consumer awareness: Some consumers claim ID theft rather than pay debt

Troublesome Trends

Consumers typically discover Fraud on their own

Fraud Top ways consumers discovered fraud

New-account fraud

Denied credit, Saw charge on credit card statement

Check forgery Saw charge on check account

statement

Unauthorized DDA transfers

Saw charge on check account statement

Credit card purchases

Saw charge on credit card statement

Credit card cash advances

Card company called Saw charge on credit card statement

Strategic Planning Assumption

Credit issuers will misclassify more than 60 percent of identity theft as credit loss in 2006 (0.6 probability).

What Worried Consumers Want From Service Providers for Added Security

Not at allNot at all Desirable Extremely Desirable Extremely1 55

4.5

Ask me questions online that onlyI can answer when logging in

Authenticate themselves to me; for example, with shared

secret message

4.2

4.0

Use separate device, such as cell phone or card for online account access

3.6Give me program to download that prevents hacker from intercepting

2.6

Base: 5,000 online U.S. consumers; those who are very worried about security (April 2004)

What would you like your online service provider to do to improve the security of your information?

Make service provider legally responsible for strict

security measures

Strategic Planning Assumption

If phishing antidotes are not implemented, consumer trust will erode and annual U.S. e-commerce growth will slow to 10 percent or less by 2007 (0.6 probability).