Do businesses overestimate their effectiveness against identity fraud? Recent findings suggest they may indeed be doing so. Despite many European organizations believing they are well-equipped to combat identity theft, a significant portion does not consistently monitor this critical issue.

A report by Signicat and Red Goat Cyber Security highlights that only 5% of participants expressed doubt about their identity fraud procedures. About three-quarters are convinced they are successful in battling the issue, yet 47% do not keep track of fraudulent activities regularly.

Unawareness as a Barrier

One of the main issues with detecting fraud is that you cannot recognize what you are unaware of,” said Jennifer Pitt, Senior Analyst for Fraud Management at Javelin Strategy & Research. If consumers aren’t reporting incidents, it can create the illusion that an organization’s fraud prevention measures are effective when they might be failing to catch many cases.”

An Increasing Concern

These perceived successes are less likely given the stark reality: one in five transactions is estimated to be fraudulent. Identity theft and its associated costs could cut up to 22% of annual revenue for these businesses. Moreover, the problem appears to be worsening—Signicat’s data shows a 69% increase in identity fraud attempts over the last four years with overall fraud incidents rising by 88%.

Overlooked Types of Fraud

In Europe, identity fraud makes up 9.3% of all attempted fraud this year, making it the most common type of fraudulent activity. Account takeover and social engineering follow closely behind as top methods. According to the study, ID fraud is particularly prevalent in banking, while payments industries face more frequent account takeover incidents.

Some types of fraud, such as account takeover and synthetic identity fraud, are harder to spot,” observed Pitt. Companies may rely on a single method for detection instead of using layered approaches that can handle the increasingly complex threats.”

The Ongoing Challenge

The research also found that 80% of businesses believe pushing back against criminals only prompts them to adapt, making it a continuous challenge. Fraud evolves faster than current detection systems,” said Pitt. Organizations relying on outdated and static methods might miss emerging threats, leading to an illusion of security when fraud remains unnoticed.”