Online Fraud Declining, Losses Up?

A new report from Javelin Strategy and Research finds incidents of online fraud are declining, while the average loss per incident is going up.

A new report from Javelin Strategy and Research suggests that while the Internet is by no means a crime- and fraud-free utopia, the majority of fraud and identity theft occurs out in the real world rather than via the Internet. However, folks who get scammed online are losing more and more money.

According to the report (available to paid subscribers), in identity theft cases where the source of the information was known, only 9 percent stemmed from phishing scams, hacking, worms, or viruses. In contrast, nearly one third (30 percent) resulted from a lost or stolen wallet or credit card.

The study also found that nearly 70 percent of fraudulent activity and scams were conducted by postal mail or by telephone, rather than via the Internet.

However, per-incident losses for online fraud have increased from an average of $2,897 in 2004 to an average $6,432 in 2005 (an increase of 122 percent); during the same period, losses from frauds conducted using data stolen from garbage or postal mail declined by 14 percent.

Phishing scams also seem to take longer for victims to figure out: the average length of misuse of personal information resulting from a phishing scam was found to be 173 days. Personal information stolen by friends, family, or employees was misused for an average of 134 days, while lot or stolen credit cards were misused for an average of 75 days.

The Javelin Data would seem to put a slightly different spin on data recently released on by the Federal Trade Commission (PDF), which found, of the nearly 687,000 fraud complaints filed with the FTC in 2005, identity theft complaints comprised more than one third (37 percent) of complaints, while Internet-related complaints accounted for nearly half (46 percent) of fraud complaints. Monetary losses from Internet-related complaints were over $335 million in 2005, with a median loss of $345. The metropolitan areas with the highest rates of consumer fraud were Washington DC, Tampa-St. Petersburg-Clearwater, Florida, and Seattle-Tacoma-Bellevue, Washington.