Of all the fraud vectors plaguing the payments industry, synthetic identity fraud is one of the most concerning. Unlike card-present fraud, which is on the decline due to the widespread adoption of EMV technology, synthetic fraud is on the rise. Worse yet, traditional fraud models are ill-equipped to even identify it. Also concerning is that children are often the victims of this type of fraud. In fact, an estimated 40% of identified synthetic identities were constructed using information stolen from children born after 2011, according to a recent white paper from GIACT, a leading fraud prevention company. The paper went on to note that this fraud vector is being driven by the prevalence of data breaches: In 2018, 446 million consumer records were exposed in data breaches, a 126% increase from 2017. The rise of synthetic identity fraud is costing the payments industry considerably. For instance, the credit card industry alone lost $6 billion due to this type of fraud in 2016, according to GIACT’s white paper, The Hidden Costs of Synthetic Identity Fraud. In light of such alarming statistics, and to learn more about what synthetic data fraud is and how to stop it, PaymentsJournal sat down with David Barnhardt, Chief Experience Officer at GIACT, and Tim Sloane, VP of Payments Innovation at Mercator Advisory Group. During the discussion, Barnhardt and Sloane defined what synthetic identity fraud is, sketched out the contours of the issue, and discussed how GIACT’s fraud products can enable companies to fight back. PaymentsJournalSynthetic Identity Fraud is Rising. GIACT’s Fighting Back.PaymentsJournal Synthetic Identity Fraud is Rising. GIACT’s Fighting Back.PaymentsJournaljQuery(document).ready(function ($){var settings_ap40049336 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"40049336",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_83327_2",settings_ap40049336); }catch(err){ console.warn("cannot init player", err); } }); Understanding synthetic identity fraud Synthetic identity fraud occurs when criminals combine real and fake identity information to make a new, fake identity. By combining some real elements with fake ones, the ensuing profile is harder to detect as being fraudulent. Sloane explained that criminals are turning towards this type of fraud for two main reasons. First, with all the personal information that has been compromised in data breaches, stealing someone’s personal information has never been easier. Social security numbers, addresses, account usernames, and passwords can be readily purchased on the dark web. Second, EMV chip technology has made card-present fraud increasingly harder to get away with. In response, fraudsters have turned to cyber fraud as an easier and more lucrative alternative.