Are businesses overly confident in their ability to combat identity fraud? Recent findings indicate they may be. Despite many European companies believing they effectively manage this issue, the reality suggests otherwise. Only 5% of respondents claimed a lack of confidence in their identity fraud processes. About three-quarters felt they were successfully winning this battle—yet, 47% do not consistently track its impact.

“A core challenge with fraud is that you can’t detect what you aren’t aware of or looking for,” stated Jennifer Pitt, Senior Analyst of Fraud Management at Javelin Strategy & Research. “When consumers fail to report instances of fraud due to various reasons, it gives an illusion of the organization’s fraud controls working well.”

A Growing Concern

These confidence levels are particularly alarming considering that European businesses estimate one in five transactions as fraudulent. Identity fraud and associated costs affect up to 22% of their annual revenue, a figure that continues to rise. Signicat’s data reveals a 69% increase in identity fraud attempts over the past four years, with overall fraud attempts jumping by 88%.

Challenges in Detection

Identity fraud remains the most common type of fraud in Europe, accounting for 9.3% of all fraud attempts this year. Account takeover and social engineering follow as the second and third most prevalent methods. The study highlights that identity fraud is particularly significant within the banking sector, while account takeover poses the greatest threat in the payments industry.

“Some types of fraud, such as account takeover and synthetic identity fraud, are harder to detect,” Pitt emphasized. “Organizations might rely on a single detection method instead of adopting layered approaches necessary to address more advanced forms of fraud.”

The research further indicates that 80% of businesses believe pushing back against criminals merely prompts them to adapt their strategies, highlighting the continuous challenge in combating fraud. Pitt added, “Fraud is evolving faster than current detection systems can keep up. Organizations using outdated and static methods might be overlooking newer, more complex fraud threats, thereby creating a false sense that they are effective.”