Identity fraud imposes staggering costs on individuals, businesses, and governments. The lack of a trusted digital identity infrastructure means online interactions depend on outdated verification methods, paper IDs scanned into computers, passwords reused across accounts, databases filled with sensitive information, which create vulnerabilities that fraudsters exploit on a massive scale.
Consumer losses
In 2024, the FBI's Internet Crime Complaint Center (IC3) reported that scammers stole a record $16.6 billion from Americans, a 33% increase from the previous year. The Federal Trade Commission's Consumer Sentinel Network reported that consumers lost more than $12.5 billion to fraud in 2024, a 25% rise compared to 2023.
These figures represent direct financial losses, money stolen through scams, unauthorized transactions, and fraudulent accounts. They don't capture the full human cost: the hours spent disputing charges, repairing credit, and navigating bureaucratic processes to prove you are who you say you are. For victims, identity fraud creates lasting stress, damaged credit scores, and difficulty accessing services for months or years afterward.
Imposter scams are among the most common types of fraud, where criminals pose as trusted institutions or individuals to steal money or sensitive information. As communication moves increasingly online, these scams become more sophisticated and harder to detect.
Public program fraud
Government benefit programs face significant exposure to fraud without strong identity proofing and program integrity controls. In 2023 testimony and supporting analysis, the U.S. Department of Labor’s Office of Inspector General noted that more than $888 billion in pandemic UI benefits were paid and estimated that at least $191 billion in pandemic UI payments could have been improperly paid, with a significant portion attributable to fraud.
This fraud has cascading effects. It diverts resources from people who genuinely need assistance. It delays benefits for legitimate claimants as agencies implement additional verification steps. And it erodes public trust in government programs, making it harder to deliver digital-first services in the future.
Without effective ways to confirm identity online, governments must rely on weaker verification methods, which leave programs vulnerable. The choice becomes accepting higher fraud rates or creating onerous verification processes that exclude legitimate applicants.
Business and compliance costs
Businesses face increasing costs associated with identity-related fraud and the compliance measures necessary to prevent it. Financial institutions invest heavily in fraud detection systems, identity verification services, and remediation when fraud occurs. LexisNexis reports that compliance costs tied to identity management reached $274.1 billion in 2022, up sharply from $213.9 billion in 2020.
These costs flow through the economy. Banks build fraud losses into their pricing. Retailers increase prices to cover chargebacks and prevention measures. Startups face barriers to entry when compliance costs are prohibitive. The entire digital economy operates less efficiently because establishing a trusted identity is a significant challenge.
The synthetic fraud surge
Synthetic identity fraud, where criminals combine real and fabricated information to create fictitious identities, has become particularly costly. Federal Reserve-affiliated analysis indicates synthetic fraud accounted for $35 billion in losses in 2023. These losses are especially difficult to recover because there's no real victim to notify and no legitimate identity holder pursuing the fraudster.
Generative AI is accelerating these losses. FinCEN has warned that criminals now use AI to create deepfake videos, synthetic documents, and realistic audio to bypass identity checks at scale. Traditional verification methods are increasingly ineffective against these sophisticated attacks.
How digital identity reduces fraud
A trustworthy digital identity system addresses these costs at their source. By shifting verification from paper-based processes to cryptographically signed credentials, organizations can confirm identity without storing unnecessary personal information.
With interoperable identity solutions, banks, employers, and government agencies can verify facts like age, residency, or licensing status without holding full datasets. An airline could verify a passenger's identity with a mobile ID without storing a passport scan. A government agency could confirm benefit eligibility instantly, thereby reducing the likelihood of fraudulent attempts. A business could authenticate customers with strong verification, avoiding reliance on weak passwords.
This shift reduces fraud by eliminating the document-based verification that synthetic identities exploit. It also reduces breach risk by minimizing the sensitive data organizations must store. Digital identity isn't just fraud prevention, it's a foundation for safer, more efficient digital transactions that benefit everyone.
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